Habitability Requirements for FHA Loans

When qualifying for an FHA home loan, the property you intend to occupy must meet a specific set of guidelines for an FHA underwriter to deem the property as habitable. Below is the set of guidelines that FHA underwriting departments utilize.

History

Several years ago, FHA loans did not require many stipulations on their buyers, allowing investors to flood the market. Due to this, foreclosure rates have increased and habitability requirements have been set in place.

Types

FHA habitability requirements come in two types: residency and safe dwelling. Each of these conditions must be met in order to obtain FHA approved financing.

FHA 203B

The FHA 203B loan is a standard FHA loan requiring 3.5 percent minimum down payment, and that the property in question have running water, working appliances, and be in good repair.

Residency

The person or persons purchasing the property under a FHA 203B loan must occupy the property as their primary residence. Vacation homes, second homes and investment properties do not apply.

FHA 203K

FHA 203K loans were designed to help the consumer purchase a home that was in need of repair work, as well as providing for an additional escrow amount.

Considerations

Investors seeking to purchase property would be better off taking on an FHA or VA assumable property as opposed to financing investment properties on their own, since these do not require the habitability requirements of FHA loans.

Misconceptions

Underwriting guidelines for FHA loans are continuously changing ; those with poor credit histories will typically not be approved, and will face the same habitability guidelines.