What Does FHA Require for Home Inspection?

The Federal Housing Administration (FHA) insures mortgages provided by FHA-approved lenders, making homeownership accessible. This insurance protects lenders if a borrower defaults. FHA loans have specific property eligibility requirements to ensure the home meets foundational standards, focusing on its condition and habitability.

What FHA Actually Requires

The FHA does not mandate a traditional home inspection for loan approval. Instead, it requires an FHA-approved appraisal by a licensed appraiser. This appraisal determines market value and assesses if the home meets FHA’s Minimum Property Standards (MPS) and Minimum Property Requirements (MPR), ensuring the property is safe, structurally sound, and secure.

An FHA appraisal differs from a typical home inspection, which identifies every defect. The FHA appraisal focuses on issues compromising FHA insurance eligibility, such as health and safety hazards or structural deficiencies. This process protects the lender and FHA from insuring properties with significant underlying problems. A standard home inspection, conversely, serves the buyer by providing a comprehensive overview of the property’s overall condition.

Key Property Standards Evaluated

An FHA appraiser examines a property to ensure it aligns with the Minimum Property Standards established by the U.S. Department of Housing and Urban Development (HUD). These standards cover safety, structural soundness, and security/habitability. They ensure the home provides a safe and healthy living environment, is structurally capable of long-term habitation, and has basic security features.

Safety considerations include identifying conditions that could harm occupants. Examples are exposed electrical wiring, missing handrails on staircases, or heating system issues. For homes built before 1978, peeling, chipping, or deteriorated paint must be addressed due to potential lead-based paint hazards. Appraisers also look for active infestations of wood-destroying insects, like termites.

Structural soundness requires checking for problems affecting the home’s integrity. This includes significant foundation cracks, evidence of severe water damage, or active roof leaks. The appraiser verifies the roof’s condition, ensuring it has at least two years of remaining useful life. Major structural defects affecting long-term stability must be noted.

Security and habitability standards ensure the home is livable and protected from the elements. This involves confirming the functionality of essential utilities, including water, electricity, and heating systems. Proper drainage away from the foundation is also assessed to prevent water intrusion. The appraiser checks for adequate property access and that windows and doors are secure and operational.

The Buyer’s Independent Home Inspection

While the FHA appraisal addresses specific property conditions for loan requirements, an independent home inspection is highly recommended for the buyer. This inspection provides a more detailed assessment than the FHA appraisal, covering aspects not typically within the appraiser’s scope.

A standard home inspection involves a thorough examination of the home’s various systems and components. This includes detailed checks of appliances, HVAC systems, and extensive plumbing and electrical evaluations. The inspector identifies significant issues and minor defects that, while not affecting FHA loan eligibility, could lead to future expenses or concerns.

This detailed report empowers the buyer with a deeper understanding of the property’s current state and potential maintenance needs. Insights from a home inspection can inform the buyer’s decision-making, allowing negotiation of repairs or adjustment of offers. It serves as a due diligence step, protecting the buyer’s financial interests.

Resolving Property Condition Issues

If the FHA appraisal identifies issues not meeting Minimum Property Standards, these must be addressed before loan approval and closing. The appraiser notes necessary repairs in their report. This is mandatory, as the FHA will not insure a loan on a property failing its health, safety, and structural criteria.

Responsibility for these repairs typically falls on the seller, though this can be negotiated. Once repairs are completed, a re-inspection is usually required to verify all noted deficiencies are resolved. This re-inspection is conducted by the original FHA appraiser or another FHA-approved professional.

If repairs are not completed to FHA standards, or if there is a refusal to make corrections, the loan may not be approved. For extensive repairs, an FHA 203(k) rehabilitation loan might be considered, financing both the home purchase and significant renovations. Timely resolution of these issues is important for proceeding with an FHA-insured mortgage.