November 17, 2015
The FHA home loan rules published in HUD 4000.1 include a set of minimum property standards that a home purchased with an FHA mortgage must live up to.
The FHA appraisal is the process used to determine whether a property meets these minimum standards, also known as MPRs (Minimum Property Requirements) and MPS (Minimum Property Standards). According the HUD 4000.1:
“As the on-site representative for the Mortgagee, the Appraiser provides preliminary verification that a Property meets the Property Acceptability Criteria, which includes HUDs Minimum Property Requirements (MPR) and Minimum Property Standards (MPS). Minimum Property Requirements refer to general requirements that all homes insured by FHA be safe, sound, and secure.”
HUD 4000.1 defines MPS as, “regulatory requirements relating to the safety, soundness and security of New Construction. When examination of a Property reveals noncompliance with the Property Acceptability Criteria, the Appraiser must note all repairs necessary to make the Property comply with HUDs Property Acceptability Criteria, together with the estimated cost to cure.”
The FHA loan rulebook states that in case where the appraiser cannot determine that a Property lives up to these standards, “the Mortgagee may obtain an inspection from a qualified Entity to make the determination. Mortgagees must use professional judgment in determining when inspections are necessary to determine that a property meets MPR or MPS.”
FHA minimum standards include rules for lead paint hazards, acceptable conditions for the roof, crawlspace, basements, electrical systems, and much more. Some of the MPRs are general, (electrical systems have to be in good working order, etc.) while others can be quite specific.
One question that comes up about FHA MPRs involves situations where the borrower wants to get an FHA 203(k) rehabilitation loan. How can a property that needs rehabilitation meet the FHA appraisal standards?
HUD 4000.1 addresses this specifically, stating, “The Mortgagee must confirm that the Property complies with the…eligibility criteria. If the Mortgage is to be insured under the 203(k) program, the Mortgagee must confirm that the Property will comply with the following eligibility criteria upon completion of repairs and improvements.”
That’s the important part of the 203(k) loan transaction–knowing that FHA rules stipulate the property must meet FHA minimum standards once the work is done.
We’ll examine specific FHA loan minimum property requirements in future blog posts.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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