15 Must Know FHA Guidelines for Home Buying and Selling

Click Here to Get Your Printable FHA Guideline Checklist to Take with You

FHA (Federal Housing Administration) is a mortgage that is referred to sometimes as a first time homeowner loan. Actually, FHA is available to any owner occupant, at any point in their life, provided that they qualify for the mortgage. Many call the FHA mortgage the “first-time homebuyer loan” because it is a little more forgiving to buyers that are, perhaps, just finishing their higher education, and have more debt than a seasoned home buyer.

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FHA Guidelines

This forgiveness on the loan side, does come with strings attached. The home that the FHA buyer purchases must meet strict guidelines in terms of condition. If the house does not meet appraisal guidelines, then the buyer may not get to buy that particular home.

Why is knowing if the home you are selling or wanting to buy meets the FHA guidelines?

Seller, you have taken your home off the market for approximately 2-3 weeks waiting for the appraisal findings. Should your home not meet FHA guidelines and the required repairs discovered during the appraisal, you have a choice, either fix the required items or lose the buyer. Should you not agree to the terms in the appraisal, you not only have lost the buyer, but have also lost valuable marketing time!

Keep in mind, should you decide NOT to repair those items found by the FHA appraiser, you home is tagged for a period of time, and you will not be able to sell your home to another FHA buyer.

Buyer, why should you be looking for homes that meet the FHA guidelines? Two reasons: you can waste a lot of time and you stand to lose money. Appraisals usually are ordered after the home inspection. In that case, you have already paid between $300-500 for a home inspection(s) and usually your lender will ask you to pay for the appraisal before it is ordered. An appraisal typically costs between $300-500. So, you have already spent $1,000 BEFORE you found out the house wouldn’t qualify. That can be an expensive lesson!

Hence, learning the FHA guidelines for a home before you sell or buy can keep you from losing time and money!



FHA Guidelines for a Home

Here are the FHA guidelines or a framework to use. These may not include all of the items that an appraiser looks for, but these touch on the major issues most buyers and sellers face. I can tell you from experience that these issues are very hard to overcome and can make or break a deal.

First, FHA looks for three main qualities in a home: it must be safe, secure and sound. What does this mean? FHA evaluates the following items in a home to determine if those three goals are being met.

*All utilities must be turned on and in working order for the appraisal.

• Roof Condition

It must have 2 to 3 years of life left. No missing shingles (roofing materials) or active leaks. The appraiser will be accessing the attic to determine if there are any issues with the roof and construction.

• Heating/Cooling System

It must be in working order to support healthy and comfortable living conditions and it cannot be past its useful life.

• Plumbing

All faucets must be in working order and there should be no leaks. You must have working toilets and tub/showers. Also, adequate water pressure and no funny smells. The appraiser will run the water and flush toilets.

• Electrical

No exposed wires, no missing knockouts in the electrical panel. If you are looking at a home with old wiring such as knob and tube, it will not pass the appraisal. If you are looking at a home with a fuse box, it is questionable. If you live in Florida, most insurance companies will not write a policy on a home that has a fuse box. No insurance means no loan.

• Windows and Doors

They must be in working order: they should open and shut properly and there cannot be any broken glass in windows or doors.

• Railings

Stairways and elevated porches must have railings.

• Paint

Homes built prior to 1978 will have to address the lead-based paint requirement. In homes built prior to 1978, there cannot be chipped or peeling paint anywhere. Having chipped or peeling paint, inside or outside when a home was built prior to 1978 is a major red flag. The no peeling paint requirement also pertains to outbuildings as well.

• Termites and other wood-destroying organisms

You MUST have this inspection. Should the inspector find past damage, it may have to be repaired. You cannot have active termites or other destroying pests. If found, the property and out buildings must be treated prior to closing.

• Kitchen Appliances

This requirement is a little vague but here is how I have had it explained to me. All appliances must be present (refrigerator and stove). Those 2 items must work.

• Flooring

If there is flooring missing in the home, for example the carpet was removed because it was damaged or badly soiled, the appraiser may call for new flooring.

• Foundations

No structural issues with the foundation. It must be sound. If previous work has been done to the foundation, an additional inspection from a qualified engineer or company may be required. Crawl Spaces and basements must be dry, free of mildew and show no signs of structural issues.

• Swimming Pools

Must comply with local ordinances for safety (gated and secured). The pool must have the equipment and be in working order. If the pool is winterized, the appraiser makes the determination of whether the pool works or not.

• Additions to the Home/Converted Living Space

If not done with the proper permits, can pose a problem. This takes into consideration the gross living space and what is shown on the tax record. If the addition or converted living space does not have heating or cooling to it, it could be an issue. Also, if the work done was subpar, the appraiser may fail the room addition. When considering an offer on a home, ask if the converted garage was done with permits or if the sunroom that is clearly an addition was permitted.

• Mold

No mold and no mildew inside the home.

• Flip Rule!!

This is one that gets missed quite a bit. There is a 90-day flip rule for properties being sold to an FHA buyer. That means that if you are looking at a home that is owned by an investor who purchased the property, made repairs and now currently has it up for sale then you may not be able to buy that house until that investor has owned the home for 90 days or more. Many get caught on this rule. Waiting may be no big deal for you and hopefully the investor will wait. However, you as the buyer run the risk of an interest rate hike.

Why the Guidelines for FHA?

The FHA guidelines were created so that the new buyer would be getting a safe, sound and secure home and not met with large expenses within the first year of home ownership.

Sellers, preparing your home for an FHA buyer allows you to expand your would be buyer base with the potential for selling your home at a higher amount due to the laws of supply and demand.
FHA buyers are having a difficult time competing with cash buyers in many markets. Most sellers do not offer their homes to FHA buyers because they are sometimes uncertain of what is expected of them. Knowing and using this checklist will allow you to prepare your home and sell it without worries. It is always suggested to have your home inspected prior to putting it up for sale.

These FHA guidelines typically mean that you, as the buyer, cannot purchase a fixer upper. The home must be in good condition. However, if you would like to buy a home that needs repairs, you may want to consider an FHA 203K. That is a mortgage that does allow for an owner occupant to buy and home that needs repairs.

Using this checklist can save you time, help in your property search and get you into your new home with less headache and stress. Knowledge is power!

For more information on FHA guidelines for home selling or buying, contact Sandy at 941-564-9491. Sandy is a Broker Associate with over 17 years experience in helping Sellers and Buyers achieve their real estate goals. Experience does matter!!