FHA requirements complicate fixer-upper purchases

Three green houses on stacks of coins

The number of foreclosures on the market means that numerous for-sale properties have something wrong with them, often due to neglect or vandalism. At the same time, economic conditions mean that many borrowers are turning to FHA loans as their only mortgage option.

While borrowers might be willing to purchase an imperfect property and make repairs, the FHA may not be willing to extend financing on these properties.

Its minimum property standards set forth numerous requirements for home safety, security and soundness on properties secured by FHA loans.

Be aware of the following minimum property requirements when you’re looking at homes. This short list is by no means exhaustive, but covers problems home buyers encounter frequently.

Bathrooms
The FHA will not let you buy a home that lacks a toilet, sink or shower. If you’re looking at a foreclosed property that was trashed by the previous owner or at a partially completed rehab, these fixtures might very well be missing.

Defective conditions
Unless you have experience in construction or serious rehabs, you probably won’t be interested in properties with significant defects anyway, but the FHA will not let you buy a home with moisture problems, settling issues, shoddy construction, decaying structural elements or damage from wood-destroying pests.

Heating
The FHA does not seem to be concerned about how hot you might get in the summer, but it is worried about how cold you might get in the winter. If the home doesn’t have a functional heat source that warms every habitable room, you’re out of luck.

Lead-based paint
Homes constructed before 1978 commonly have lead-based paint. If a painted surface is chipping, flaking or peeling, whether it’s on the inside or the outside of the home, the FHA will want to see it repaired so that no one gets lead poisoning.

Roof covering
No more than three layers of roofing are allowed, and if the roof is leaking, it must be fixed. Also, the existing roof should have a remaining lifespan of at least two years.

The catch-22 is that, because foreclosed properties are bank-owned, it is difficult if not impossible to get the property owner to make the repairs that would get the property sold.

Home buyers who are interested in a property that has any of the above problems should find out if the FHA will allow them to purchase the property before they get their hopes up.

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