Minimum Property Requirements for FHA Loans, According to HUD

FHA loans are a popular mortgage financing option among home buyers in the United States. This program allows borrowers to buy a home with a down payment as low as 3.5% of the purchase price. It also tends to be more flexible and forgiving when it comes to past credit issues, debt level, etc.

But FHA loans also have some specific property requirements for the home being purchased. Generally speaking, this program is intended for well-maintained properties that are in good overall condition.

Minor repair issues can often be fixed prior to closing, to keep the deal on track. In contrast, fixer-upper properties that need serious work just to be habitable typically do not qualify for FHA financing.

FHA Property Requirements at a Glance

The minimum property requirements for an FHA-insured home loan can be found in HUD Handbook 4000.1, also known as the Single Family Housing Policy Handbook. That handbook serves as the official policy guide for this program.

The Federal Housing Administration maintains a set of minimum property requirements (MPRs) for all homes purchased with an FHA loan. The official handbook states the following:

“Existing and new construction properties must comply with Application of Minimum Property Requirements and Minimum Property Standards by Construction Status.”

These criteria are designed to ensure that the property being financed is safe, structurally sound, and meets other standards set by the FHA. They also help to ensure that the home can be marketed and resold, in the event of a foreclosure scenario.

Overview of Minimum Property Requirements

Here are some of the key checkpoints the home appraiser will review:

• Property Acceptability: The property must meet HUD’s standards for safety, soundness, and security. Any defects must be repaired before approval. In short, the home should be move-in ready.
• Encroachment: The property and its structures cannot encroach on neighboring properties or easements.
• Overhead Power Lines: No high-voltage power lines can pass over the property. This requirement is intended to prevent the risk of electrocution, fire hazards, etc.
• Property Access: Safe pedestrian and adequate vehicular access from a public or private street is required.
• Bedroom Egress: For fire safety reasons, all designated bedrooms must have emergency egress to the outside. This can be in the form of an external door or a window that meets certain size requirements.
• Hazards and Nuisances: The property must be free of any hazards or nuisances that could negatively impact its value. This can include everything from environmental hazards to industrial odors to noise nuisances.
• Abandoned Wells: If the property contains abandoned gas or oil wells, they must have been safely and permanently sealed.
• Living Unit Requirements: Each living unit must have safe water, sanitary facilities, adequate space and heating, hot water, electricity, and a kitchen. Appliances included in the sale must be operational.
• Swimming Pools: Any swimming pools must comply with local regulations.
• Structural Soundness: The home’s foundation and structure of the property must be in good condition and expected to last for the life of the loan.
• Economic Life: The loan term cannot exceed the (estimated) remaining economic life of the property.
• Environmental Hazards: The property must be free of environmental hazards like lead paint or methamphetamine contamination.
• Repairs: All necessary repairs must be completed before the loan can be approved.

* The property requirements listed above apply to standard purchase loans in particular (used by home buyers). Different rules and standards may apply for FHA 203(k) rehab loans and for reverse mortgages. For more information on those, refer to HUD Handbook 4000.1.

Types of Homes That Qualify for FHA Loans

FHA loans can be used to finance various types of residential properties. These include single-family homes, condominiums, townhouses, and certain multi-unit properties (up to four units). However, the property must meet FHA standards for safety, soundness, and livability.

According to the official handbook: “Except as otherwise stated in this Handbook 4000.1, FHA’s Single Family programs are limited to one- to four-family Properties that are owner-occupied Principal Residences.”

The following property types may be eligible for FHA loan financing:

• Detached or semi-detached homes: A detached dwelling is a single-family home that stands alone, not connected to any other structure. A semi-detached dwelling (also known as a duplex) is two single-family homes sharing one common wall.
• Manufactured housing: This type of home is built in a factory and then transported to the site where it will be placed. It can include mobile homes, modular homes, and prefabricated homes.
• Townhouses or row houses: These are single-family homes that share walls with neighboring units. They are typically arranged in a row, hence the name.
• Individual condo units (with FHA approval): In order to buy a condo with an FHA loan, the condominium project must be on the approved condo list maintained by HUD. Alternatively, the lender can request a single-unit approval (a.k.a., “spot approval” for the individual unit).

The following property types are generally not eligible for FHA financing:

• Commercial enterprises
• Boarding houses
• Hotels, motels and condotels
• Tourist houses
• Private clubs
• Bed and breakfast establishments
• Other transient housing
• Vacation homes
• Fraternity and sorority houses

Reasons Why a House Might Not Qualify

If a home is in decent condition and does not have any serious safety issues or structural problems, it will likely qualify for FHA mortgage financing.

Home buyers who use an FHA loan to buy a house typically have plenty of properties to choose from (though this can vary depending on local housing market inventory conditions).

On the other hand, some properties do not qualify for this program. If a house does not meet the minimum property requirements mentioned above (and it would require serious work to bring it up to standard), it probably won’t qualify for an FHA loan.

Here are some reasons why a home might not qualify for this program:

Safety, Soundness, and Security Issues

• Major structural problems (foundation, roof, walls)
• Electrical or plumbing hazards that can’t be easily repaired
• Unsafe levels of lead-based paint or other toxic materials
• Presence of hazardous materials (asbestos, mold, etc.)
• Lack of functioning kitchen or bathroom facilities

Property Access and Location

• Unsafe or inadequate pedestrian access to the property
• Lack of proper vehicular access from a public or private street
• High-voltage power lines directly over the house
• Property encroachment issues (e.g., structures on neighboring land)
• Location in a hazardous area such as a major flood zone

Appraisal and Economic Concerns

• Remaining economic life of the property is too short for the loan term
• Appraised value of the property falls below the purchase price
• Non-compliance with FHA’s Minimum Property Requirements (MPRs)
• Excessive deferred maintenance or needed repairs

Title and Legal Issues

• Unresolved property liens or judgments
• Title defects or ownership disputes
• Encroachment on easements or building restriction lines

Note: This list is not exhaustive. There are dozens of reasons why a home might not meet the minimum requirements for the FHA loan program. Additionally, exceptions and workarounds might be possible for some of these issues. When in doubt, ask your lender for clarification.

Making Repairs After the Inspection

If a house falls short of one of these requirements, that doesn’t necessarily mean the loan will fall through. Granted, some items are deal breakers. But many issues can be repaired or remedied prior to closing, to keep the deal on track.

If the FHA appraiser finds an item that needs to be repaired, he or she will make a note of the specific repair requirement. The home buyer can then decide if they want to ask the seller to make those repairs or reduce the sale price accordingly.

If the appraiser makes a subsequent visit and finds that all items have been fixed, he or she will give the property a green light. At this point, all property-related restrictions will be lifted, and the loan will be allowed to proceed.

Disclaimer: This article was last updated in 2024 to reflect the guidelines available at that time. Despite its detailed nature, this guide does not cover all FHA property requirements, guidelines, or procedures. It is designed to give home buyers a general understanding as to which properties might qualify for the program, to help facilitate the house hunting process.

Brandon Cornett

Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author