Before an owner can market a property to buyers that want to use a FHA loan, they will want to familiarize themselves with FHA’s standards. FHA won’t insure loans on just any property. While their standards aren’t as stringent as they used to be, a home needs to be in relatively good condition to qualify for FHA financing.
RELATED ARTICLE: Should You Improve Your Chicago Home Before Selling Or Not?
Location and Lot
To qualify for an FHA loan, the property has to be located on a road or easement that lets the owner freely enter and exit. The access also has to be paved with a surface that will work all year — in other words, a long dirt driveway that washes out in spring won’t qualify.
FHA also wants the lot to be safe and free of pollution, radiation and other hazards. For that matter, it also needs to provide adequate drainage to keep water away from the house.
The FHA’s requirements for making a loan start with the home’s roof. To pass muster, the house must have a watertight roof with some future life left. In addition, if the roof has three or more layers of old shingles, they must all be torn off as part of the replacement process.
The property’s exterior has to be free of chipped or damaged paint if the home has any risk of having lead paint. Its foundation should also be free of signs of exterior (and interior) damage. It also needs full exterior walls.
The property’s interior also needs to be inspected. FHA loan standards require that the home’s major systems be in good working order. Bedrooms should have egress routes for fire safety and the attic and basement should be free of signs of water or mold damage.
The bottom line is that the FHA wants to make loans on homes that borrowers can occupy. This doesn’t mean that a home has to be in perfect condition to be sold to an FHA mortgage-using borrower. It just needs to be a place that they can live.
Contact us at Insider Show Homes LLC to discuss these issues as well as any other questions regarding the sale of your home.