March 1, 2018
When it comes to FHA appraisal rules, it’s easy to forget that the appraisal requirements and minimum property standards set by the FHA are not the only regulations which must be followed. State law, and local building codes also apply.
The FHA/HUD official site includes instructions to participating lenders and appraisers about model building codes and how FHA mortgage appraisal rules work together in the FHA loan transaction process.
According to FHA.gov, “The Minimum Property Standards (MPS) establish certain minimum standards for buildings constructed under HUD housing programs. This includes new single family homes, multi-family housing and health care type facilities”.
At one time there were a variety of minimum property standards for different types of properties. But since the era of the 1980s, the Department of Housing and Urban Development began accepting model building codes and local code requirements instead of trying to establish comprehensive MPS guidelines for so many different structure types.
There is one exception, according to the FHA/HUD official site, which states, “…there is one major area of difference between the MPS and other model building codes: durability requirements. Homes and projects financed by FHA-insured mortgages are the collateral for these loans and their lack of durability can increase FHA’s financial risk in the event of default.”
According to HUD, model building codes fail to address, “any minimum requirements for the durability of such items as doors, windows, gutters and downspouts, painting and wall coverings, kitchen cabinets and carpeting”.
That is why FHA minimum standards has “minimum standards for these, and other items, to ensure that the value of an FHA-insured home is not reduced by the deterioration of these components”.
FHA loan rules and your participating FHA lender will require that any property purchased with an FHA Single-Family mortgage or refinance loan meet (or be repaired/renovated to meet) one of the nationally recognized building codes or “…a State or local building code based on a nationally recognized building code”.
In housing markets where state/local building code is not present, “HUD determines if the State or local code is comparable to the model building code”.
There are also areas of the United States that do not have building codes. If no State or local building code has been adopted, the appropriate HUD Field Office will specify a building code that is comparable to one of the nationally recognized model building codes.
Speak to a loan officer if you are unsure about how these issues pertain to your home loan or to find out what minimum property standards are being used in the absence of state/local code.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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