Five Red Flags to FHA Financing Your Minneapolis Duplex

said on January 9th, 2009 categorized under: Financing

There was a time not long ago that a property had to be nearly perfect upon purchaseĀ in order to pass the strict inspection involved in an FHA

First, let me explain: the inspection during the appraisal process should not be confused with a home inspection. The FHA simply has its appraisers make certain a property meets certain minimum criteria before it will agree to back the loan.

Like most things in today’s real estate market, the FHA has had to change with the times. According to Vikki Boedekker at Burnet Home Loans, “FHA appraisal guidelines have relaxed while conventional guidelines have tightened up so the net result is that there are few differences on a practical level.” The key issues are: safety, habitability, structural integrity and marketability. The definitions of those things, she adds, “have gotten broader or more open to ‘common sense’ interpretation.”

While the FHA standards are extensive, five common maintenance items to be on the lookout for are:

  1. Flaking paint on properties built prior to 1978, or evidence of rotting surfaces.
  2. Electrical Service – while 60 amp service may be acceptable in smaller properties, larger homes may require an electrical certification or upgrade. Of course, any electrical wiring done by anyone other than a licensed professional may also be a red flag.
  3. Roofing- at least 10 percent of the roof should be exposed for inspection. If the roof is flat, it may warrant special attention.
  4. Plumbing – minor leaks are no longer required to be repaired unless there is evidence of significant damage as a result of the leak.
  5. Crawl Space – unvented crawl spaces are often a red flag.

The good news is FHA lender-mandated repairs totaling less than $5000 are no longer required to be completed prior to closing. And, of course, it’s virtually impossible to paint the exterior of any duplex in a Minnesota winter.

Of course, these relaxed standards are especially beneficial with the plentiful supply of foreclosed properties on the market. Many would actually sail through FHA appraisals. For a complete list of the FHA’s valuation conditions, click here.