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Unsafe stairs could be a problem with an FHA loan. Design Pics/Valueline/Getty Images
The Federal Housing Administration insures lenders against homebuyers defaulting on their mortgage. This allows lenders to offer lower interest rates and accept as little as a 3.5 percent down payment. Because the house is the collateral for the loan, the FHA wants it in good condition, so an appraiser will determine if the house meets FHA standards. Sellers must fix any major problems before the FHA will agree to insure the mortgage.
Model Building Codes
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Building-code organizations have created several model codes used by building inspectors around the country. FHA appraisers will use local building codes to evaluate homes if they are based on one of the model codes; if the county or city doesn't use a model code, the local FHA office will choose one for appraisers to apply.
Minimum Property Standards
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FHA wants a house to last long enough to be good collateral, according to the Department of Housing and Urban Development, but model building codes don't check for durability. For that, FHA appraisers use HUD's minimum property standards. For example, the FHA Info website states, the roof on an FHA home must have at least two years of life in it; anything less and the house will have to be completely reroofed before the FHA insures the loan.
Safety
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Safety is important in the FHA's specs, the Houston Appraisal Company states. Flaws that put the occupants at risk, such as foundation damage, exposed sub-flooring or inadequate exits from the bedrooms to the outside could all be grounds for rejecting an FHA loan. Outside problems such as gas lines or soil contamination close to the house could have the same effect.
Electricity and Heat
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The heating and electrical systems must be in good condition, with no frayed or exposed wiring. The heating system must be able to maintain the house at 50 degrees in every part. Wall heaters and floor heaters are acceptable if they meet the building code, but wood stoves and solar systems must have a conventional heating system as a backup.
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