The Federal Housing Administration (FHA) has Minimum Property Standards that are established to help protect and reduce risk for FHA insured home mortgages.
Home Inspections of Minnesota is authorized by HUD and FHA to perform any type of inspection that may be required for single family homes.
Often, a simple inspection performed at the time of appraisal is sufficient. However, if the home is in need of repairs, an FHA inspector may be required to verify proper repairs have been performed. If repairs are extensive, FHA has special programs that may allow for extensive rehabilitation.
The following is a brief list of some of the more common property conditions which represent a risk to the health and safety of the occupants or the soundness of the property for which FHA will require repair for existing properties to qualify for FHA loans:
The following conditions, when present will require evaluation by a FHA inspector:
- Inadequate access/egress from bedrooms to exterior of home
- Leaking or worn out roofs (if 3 or more layers of shingles on leaking or worn out roof, all existing shingles must be removed before re-roofing)
- Evidence of structural problems (such as foundation damage caused by excessive settlement)
- Defective paint surfaces in homes constructed pre-1978
- Defective exterior paint surfaces in homes constructed post-1978 where finish is otherwise unprotected
- Inoperable heating, plumbing or electric
For more information please visit www.fha.gov
- Standing water against the foundation and/or excessively damp basements
- Hazardous material on the site or within the improvements
- Faulty or defective mechanical systems (electrical, plumbing, or heating)
- Evidence of possible structural failure (e.g., settlement or bulging foundation wall)
FHA 203K loans
FHA 203k loans provide a financing option that allows mortgage funds to be used for rehabilitation and repair of single family properties. Special inspections may be required and the two most popular programs are outlined below.
The Streamlined (k) program includes funding for the discretionary improvements and/or repairs shown below:
- Home must be owner occupied
- Minimum loan amount is $5,000
- Maximum loan amount is $35,000
- FHA Inspection is required prior to payout if loan amount exceeds $15,000
- Work must begin within 30 days of closing and be completed within six (6) months of closing
- Work must be completed by licensed contractors, self-help may not be approved
The Streamlined (K) program does not provide funds for:
- Repair/Replacement of roofs, gutters and downspouts
- Repair/Replacement/Upgrade of existing HVAC systems
- Repair/Replacement/Upgrade of plumbing and electrical systems
- Repair/Replacement of flooring
- Minor remodeling, such as kitchens, which does not involve structural repairs
- Painting, both exterior and interior
- Weatherization, including storm windows and doors, insulation, weather stripping, etc.
- Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
- Accessibility improvements for persons with disabilities
- Lead-based paint stabilization or abatement of lead-based paint hazards
- Repair/Replace/add exterior decks, patios, porches
- Basement finishing, and remodeling, which does not involve structural repairs
- Basement waterproofing
- Window and door replacements and exterior wall re-siding
- Septic system and/or well repair or replacement
- Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall;
- New construction (including room additions);
- Repair of structural damage;
- Repairs requiring detailed drawings or architectural exhibits;
- Landscaping or similar site amenity improvements;
- Any repair or improvement requiring a work schedule longer than six (6) months;
- Rehabilitation activities that require more than two (2) payments per specialized contractor; or
- Luxury items.
- Must be owner occupied
- Must be one to four family dwelling
- Funds may be used for major repair/remodeling, including structural alterations
- Funds may not be used for luxury items
- FHA 203K Consultant must be employed to assist with preparing required architectural exhibits
- Consultant retainer fee to be collected at first meeting
*Additional fees may apply
|REPAIR AMOUNT ||CONSULTANT FEE|
|$75,001 -100,000 ||$900|
|$100,000 and up ||$1,000|
Roll of a FHA 203K Consultant:
I. Site Visit
II. Consultant prepares a detailed Work Write-Up which contains:
- Consultant meets with the borrower at the site.
- A general examination of the work to be done determines if the project is feasible.
- If feasible, Client signs Consultant Agreement and pays Consultant the minimum $400 retainer fee.
III. Consultant delivers the Work Write-Up Packages
- Clear, concise project specifications
- Construction cost analysis
- HUD required draw request forms
- Preparation of contractor bid packages
- Preparation of lender packages
IV. Selection of a Contractor by the Borrower
V. Loan Closes
- The Borrower selects a contractor. Borrowers should be aware that many lenders may have contractor qualification criteria. Some lenders maintain a list of contractors that have met their qualification criteria. Discuss contractor selection with your lender to learn about their contractor requirements. If you’re considering a contractor which has not yet been approved by your lender or has never done a 203(k), it is important that they are informed early on about the 203(k) concept as it applies to contractors.
VI. Consultant Performs Draw Request Inspections
- Repair funds are placed in escrow.
- Remodeling begins.
- 1st Draw - Consultant insures permits were issued.
- 2nd and 3rd Draw - Draw request inspections are performed as work progresses.
- 4th Draw - A punch list is established.
- 5th Draw - The project is closed out and warranties and lien releases collected.
For more information please visit http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm
Home Inspections of Minnesota
190 Wildwood Bay Drive
Mahtomedi, MN 55115
Office: (651) 653-7111
Cell: (612) 840-0709