FHA Approved Builder Qualifications

The Federal Housing Administration, generally known as FHA or HUD, is the largest insurer of mortgages in the world and provides home mortgage insurance on loans made by FHA-approved lenders across the United States. Because the FHA insures mortgages on single family and multifamily homes, including manufactured homes and hospitals, it also approves home builders associated with its mortgages. Although it eliminated its process for qualifying home builders in 1995, any builders who intend to sell properties with HUD insurance still must adhere to qualifications established by the FHA's Fair Housing Marketing Plans.

All builders should start by acquiring the HUD Handbook 8025.1, which is available at their local HUD office. For builders seeking only to build a single property, they must complete the revised Builder Certification Form, HUD-92541, which is available at their local HUD office. An assigned appraiser will then review both the form and the site to determine if any inconsistencies exist. Along with this form, the builder is required to submit an Affirmative Fair Housing Marketing Plan (AFHMP) to illustrate the steps that will be taken to avoid discriminatory practices involving the housing project. It should include a draft of the overall building plan, such as the number of units, amenities and accessibility; expected marketing and outreach activities; and how the developer will administer a lottery process or determine applicant eligibility under applicable subsidy programs or qualifying buyers with mortgage lenders.

All builders seeking to sell five or more new properties in any 12-month period with HUD mortgage insurance must complete and file Form HUD-935.2 with the FHEO Division of their local HUD office. Along with this form, the builder is also required to submit an Affirmative Fair Housing Marketing Plan (AFHMP). Depending on the size, location and sequencing of each phase of the building project, the FHEO Division of HUD can request new or amended AFHMP plans for subsequent phases.

Builders will need to provide information about the census tract for which the project will be located as well as plans for the household types to be served by the project, such as the elderly, handicapped or others. Builders must also consider ways in which they will promote the project through media, such as newspaper ads, brochures or posted signs.