Repairs for FHA homes must meet specific guidelines
The Federal Housing Authority (FHA) is the mortgage insurance arm of the federal government, operating under the authority of the Department of Housing and Urban Development (HUD). The responsibility of the FHA is to ensure that any property under consideration for federal mortgage insurance is in an acceptable condition for habitability and marketability. This aspect is covered by FHA guidelines for repairs.
The Three S's
HUD regulations require that three aspects of a property are considered during an FHA appraisal. These are known as "the three S’s": safety and health of the occupants, security of the property for mortgage insurance purposes, and soundness of the structural integrity of the property. Any condition of the home that threatens the status of any of these factors must be repaired before the lender is allowed to release the FHA-insured funds. Part 3 (Property Analysis) of HUD Handbook 4150.2 outlines the conditions that must be inspected by the appraiser for any repairs that may be needed. Part 3-6 defines the general appraisal criteria for repair requirements including septic and sewage systems, soil grading and exterior water drainage, running hot and cold water systems, structural integrity of framing and foundation elements, ventilation systems (HVAC and others), roofing integrity and electrical systems.
FHA Property Rehabilitation Guidelines
There are many cases when a dwelling that is in need of extensive repairs will be acceptable to FHA repair guidelines, under the 203k loan program. This is a specialized appraisal process for homes that qualify as a "rehabilitation" project, which includes both major repair work and projects for updating electrical, plumbing, and HVAC systems, remodeling rooms or adding rooms, decks, and garages, or making energy conservation improvements. Required repairs under FHA guidelines for these loans include securing the thermal envelope (caulking, weather-stripping, insulating), repairing water wells and septic systems, repairing termite and moisture damage, and removing any safety and health hazards. Eligible repairs include major landscaping, adding wheelchair accessibility, replacing floor coverings and paint (if deteriorated), and repairing existing sidewalks and driveways.
Clearing Repairs for FHA Appraisal
Any repair called for under FHA guidelines must be cleared for loan approval. These clearances require a final inspection by a professional from a related field. This includes licensed, registered, and bonded engineers, licensed home inspectors, or licensed and registered tradesmen (plumbers, electricians, roofers, etc.) who must then document all repairs and sign off on the work. FHA appraisers and compliance inspectors must use the FHA Compliance Inspection Report (HUD form 92051) to certify that repairs have been adequately completed. This report offers options to the appraiser to declare that repairs have been completed and are considered compliant, or that repairs are not completed or were completed in a non-compliant manner, such as in cases where acceptable construction practice was not used or when the repair deviated from what was required for compliance. Another condition of non-compliance is when a repair contractor began the work before the approval date of the mortgage insurance by FHA.
