Finance -
Typical Lender Required Repairs for FHA Loans
Seb Frey
Seb Frey is a Capitola, California Real Estate Broker specializing in Santa Cruz Real Estate. He is fluent in Spanish and enjoys helping people find their piece of the American Dream in Santa Cruz. You can find Seb's blog at 
By Seb Frey
Published on 11/15/2008
When getting FHA financing to purchase a home, it is important to know that the FHA guidelines will often require repairs to be made to the home before the purchase will be approved. This article explores some of those common repairs.

If you are interested in using the FHA 203K Loan program to fund repairs on your home or a home you are interested in purchasing, you should know that there are some repairs that you will be required to make. The lender and the FHA want to know that their investment will be protected, and as such you will have to add these repairs to your work write up in order to get approval for the loan.

Standards for Energy Efficiency

The Department of Housing and Urban Development (HUD) wants all homes that are renovated under the FHA loan program to be as energy efficient as possible. For this reason, there are several required repairs that contribute to better energy efficiency in the building. Doors and windows must be weather stripped if the weather stripping is old and worn. The outside of the building must be inspected for openings or cracks, and these must be sealed or caulked.

If you are opening any walls on the exterior of the home, such as to replace the drywall, you will need to reinsulate behind the wall. You do not have to remove walls for the purpose of insulation, however. It simply must be done if the walls or ceilings are opened. Also, attic and crawl spaces must be ventilated adequately.

If you are replacing any HVAC systems, you will need to insulate around the supply and return pipes and the ducts in any parts of the home that are not heated or cooled by the system. You also must not purchase a unit that is too large. The unit cannot be more than 15 percent larger than the house needs, unless the manufacturer does not make a unit that fits better than the one you have chosen.

Renovations Required for Safety

The FHA does not have many safety requirements. Of course, all repairs must keep the home up to the city's coding standards. The only safety requirement that the FHA gives applies to smoke detectors. All sleeping areas must have at least one smoke detector located adjacent to the room.

Requirements for the First $5,000

The first $5,000 of the loan amount must be used for major repairs to the existing structure. Cosmetic repairs can be included in the loan, but they may not make up the first $5,000 you are given. Repairs that qualify for the first $5,000 include the following:

* Repairing structural damage
* Repairing termite damage
* Making the home handicapped accessible
* Installing new HVAC systems
* Septic or well installation or connection to city sewer
* Fixing the roof, flooring, or gutters
* Major changes to landscaping
* Major projects that increase aesthetics, such as adding new siding or a covered porch

Once you have $5,000 of major repairs in your work write up, you can begin including minor cosmetic items like new paint or trim.

In addition to these requirements, each individual lender may have repairs that they want to see done to the home. Remember, the lender wants the home to be sellable in the event that you do not repay what you owe, thus the reason for required repairs. This is not a problem, however, because the money will be made available in the FHA 203K Loan for these items.