Using an FHA loan to purchase a home has it’s perks, but can limit your home buying options. Find out what it means to be an FHA-approved property, and why some homes don’t qualify.
What is FHA approval?
An FHA-approved home means you can purchase the home with an FHA loan. One major benefit of using a government-backed FHA loan is the low down payment — you only need to pay 3.5% of the home’s value instead of the 5% – 20% required with a conventional loan. The U.S. Department of Housing and Urban Development (HUD) wants to make sure you invest in a home that has long-lasting potential for your enjoyment and eventual resale. As such, HUD has strict guidelines that enforce which homes you’re eligible to buy with an FHA loan. An FHA-approved home meets these guidelines.
A home that is not FHA approved can become FHA approved if updates are made. However, it may take time to get an FHA inspection, and there are no guarantees it will resolve every problem.
Reasons why a home is not FHA approved
In order for a home to be FHA-approved, it must meet certain safety, security, and soundness requirements. FHA inspections have higher habitability standards than typical home inspections, and the guidelines for qualification are regularly updated. Although it has become easier over the years for a home to be FHA-approved, there are still several conditions that can disqualify a home:
- Windows and doors are cracked or off their hinges
- Handrails and stairs are broken or missing
- The roof is leaky, has more than three layers, or will not last much longer
- Close proximity to a hazardous waste site, oil and gas well, or petroleum line
- Close proximity to a transmission tower or high-voltage power lines
- Close proximity to heavy traffic, an airport, or other noisy areas
- Lead-based paint in the house
- There is evidence of mold, decay, or termites
- Construction is defective or of poor quality
- The heating system is outdated, unsafe, or unable to heat all living spaces
- Not all of the plumbing works, or there are leaks
- Limited access to reliably warm water, or drinking water
- Inadequate all-weather pedestrian or vehicular driveway
- No access to front door or rear yard without passing through separate living space
- Not enough space between neighboring homes
- Crawl space is too small, inaccessible, or filled with debris
- Unfinished or warped floors and carpet
- Not all bathrooms include a toilet, sink, and shower
- Tripping hazards in or outside of the home
- Electrical box has exposed wires
How do you find homes that are FHA approved?
The best way to search for a FHA-approved home is on Redfin. For help finding homes that are FHA-approved, contact a local Redfin Agent.