The appraisal standards for mortgages insured by the Federal Housing Administration program don't require houses to be in like-new or pristine condition. The house does, however, need to be in good enough condition to be resold. At the same time, the FHA also requires houses to be relatively safe and not pose immediate health risks to their occupants.
Paint in Older Homes
Homes built before 1978 may contain lead-based paint. Since this paint can be dangerous if ingested, the FHA has relatively strict rules regarding it. If there are any defective painted surfaces on the interior or exterior of the house, or on other structures on the property like sheds or fences, the surfaces must be repaired. Defects include paint that is peeling, chipped or flaking.
The FHA requires that a home have a water-tight roof based on what the observer can readily observe. If the roof leaks or doesn't have a reasonable amount of life remaining, it must be repaired or replaced. Homes that need a new roof and already have three layers of shingles need to have the entire roof torn off first.
The site itself must be free of major hazards. These include deposits of toxic chemicals, radioactive materials or other types of pollution above and beyond what is normal in modern life. The site must also have adequate drainage. In the event the property doesn't meet these standards, the issue will need to be repaired.
Signs of Termite Infestation
If it appears that termites are present, the FHA requires a separate report from a pest inspection company, at a minimum. Properties that are at ground level, or where wood has contact with the ground, are of particular concern to the FHA, especially in areas where termites are known to be active. Any damage will need to be repaired.
General structural issues can also render a house ineligible for FHA insurance until they are repaired. Some, like defective construction or poor workmanship, are very broad. Others, like leakage, dampness, decay or a settling foundation, can be easily identified for correction. The appraiser can also require repair of any other issues that impact a property's safety, cleanliness or structural integrity.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.