FHA Repair Requirements and Guidelines for FHA Loans
Some Types of Repairs Are Not Required to be Fixed by FHA
Prior to 2005, sellers were sometimes reluctant to accept an offer from a buyer who was obtaining an FHA loan. The main reasons were that FHA required too many repairs before the loan could close, and the seller often ended up paying for those FHA repairs. Since then, FHA repair guidelines have softened.
It's not always the sellers who need to make the FHA repairs. It depends on how the buyer's purchase offer is written. For example, a buyer's agent can specify a limit, a dollar cap, on the repairs that a seller will agree to do if the seller is reluctant to sell to an FHA buyer. Or, a buyer is free, with the seller's permission, to do her own lender-required repairs.
Take the case of a Sacramento buyer who switched from a conventional loan to an FHA loan. When we informed the seller that the buyer had changed her mind and now intended to get an FHA loan, the seller agreed only if the buyer would be responsible for doing any FHA funding condition repairs called for in the appraisal.
FHA made her replace a door between the garage and the home because the existing door to the attached garage was not fireproof. She also had to install smoke detectors. This didn't seem like a big expense at the time, but the doorway between the house and the garage was not a standard width. This meant the door frame had to be altered to fit a standard door. Her total cost was almost $700, not the $150 the appraiser told her it would cost.
FHA Repairs for Garages
FHA repair guidelines are not absolute and an underwriter can call for additional repairs. A red flag is often a converted garage. It is up to the appraiser and underwriter as to whether the interior of a converted garage needs to be dismantled. The appraiser also has the option of simply appraising the value of the home without the garage conversion and/or deducting for the cost of demolition.
FHA Repairs for Non-Permitted Additions
FHA's biggest repair concerns are:
- Health and safety issues
- Protecting the security of the property, and
- Structural soundness of the property.
Often, non-permitted additions and remodels are not finished to code. Not only may FHA require that these items be brought to code, but if FHA decides to approve the loan without that requirement, FHA will not consider the value of non-permitted items in its appraisal.
FHA repair guidelines are also subject to lender overlays. FHA may approve a non-permitted structure, but the lender's investor guidelines could cause an FHA loan to be denied for a non-permitted addition or remodel.
Types of FHA Repairs That Must be Completed Prior to Closing an FHA Loan
- Peeling paint in homes built before 1978.
- Unpainted downspouts and broken rain gutters.
- Rotting outbuilding in need of demolition.
- Exterior doors that do not properly close and open.
- Exposed wiring and uncovered junction boxes.
- Major plumbing issues and leaks.
- Inoperable HVAC systems.
- Leaky or defective roofs, roofs with a life expectancy of less than 3 years, composition over shake.
- Active and visible pest infestation.
- Rotting window sills, eaves, and support columns on a porch.
- Missing appliances that usually are sold with a home such as a stove.
- Bedrooms without minimize-sized windows or bedroom windows with bars that do not release.
- Foundation or structural defects.
- Wet basements.
- Evidence of standing water in the crawl space.
- Inoperable kitchen appliances.
- Empty swimming pools, pools without a working pump and pools with mosquito fish.
- Ripped screens.
- No pressure relief valve on water heater.
- Leaning / broken fence.
Types of FHA Repairs That are Not Necessary to Fix Before Closing
- Peeling paint in homes built after 1978.
- Cracked glass in windows.
- Minor plumbing defects such as a dripping faucet.
- Missing handrails.
- Damaged wall coverings in homes built after 1978.
- Worn out carpeting or defective floor finishes.
- Beat-up or damaged exterior doors that still open and close.
- Trip hazards such as heaving sidewalks.
- Removal of debris under the house.
- Lousy workmanship.
- Evidence of previous or inactive pest infestation.
- Replacement of flat roofs.
- Testing of wells, unless required by local jurisdictions or water is suspected of contamination.
I recently received a loan condition that called for painting the eaves and either removing the dry rot from the patio pergola or removing the pergola. My suggestion to the seller was to remove the pergola, rather than replace the dry rot. He decided instead to paint the pergola and the appraiser passed it. So you never know.