Whether youre a first-time homebuyer, moving to a new home, or want to refinance your existing conventional or FHA mortgage, the FHA loan program will let you purchase a home with a low down payment and flexible guidelines.580 Credit Score- and only -3.5% Down RELATED ARTICLES
FHA loan limits were established to define how much you can borrow for a HUD-backed mortgage. Each state has different limits, so be sure to look up your state to understand what is available for your FHA home loan.
For , the FHA floor was set at $498,257 for single-family home loans. This minimum lending amount covers most U.S. counties. The FHA ceiling represents the maximum loan amount and is illustrated in the table below.
Also for 2024, the FHA ceiling was set at $1,149,825 for single-family home loans. This represents the highest amount that a borrower can get through the FHA loan program. It applies to high cost areas in the United States and is illustrated in the table below.
Paying the upfront costs of buying a new home can be challenging. To help overcome this hurdle, many local and state agencies offer down payment assistance in the form of grants or second mortgages.
As a home seller in today’s market, you may often receive offers from buyers using FHA loans. With FHA loans making up around 15% of the current mortgage market, it’s important to understand how these government-backed loans can impact you as a seller.
I’ve been helping homebuyers and sellers navigate real estate transactions for over 10 years. In this article I’ll draw on my experience to clearly explain FHA loan requirements for sellers. Consider this your complete guide to demystifying seller obligations when dealing with FHA buyers.
What Are FHA Loans?
First a quick FHA loan overview. FHA stands for Federal Housing Administration – this government agency insures these mortgages making them more accessible to buyers.
Key features
- Only need 3.5% down payment
- Lower credit score requirements
- Loans insured by FHA
The low down payment and flexible credit guidelines allow more buyers to qualify. That’s why FHA loans are popular, especially with first-time homebuyers.
Now let’s look at how these loans impact you as a seller.
FHA Appraisal and Inspection
The FHA requires an appraisal on the property, but not a separate inspection. However, the appraiser will note any defects or necessary repairs during their valuation.
As a seller, it’s important to understand the rigor of these FHA appraisals:
- Completed by a licensed, FHA-approved appraiser
- Thorough process following HUD guidelines
- Appraiser can test appliances, utilities
- Repairs under $10,000 are allowed
The appraisal determines if the property is insurable under FHA guidelines. As long as your home doesn’t need major repairs exceeding $10,000, it should pass without issues.
Seller Responsibilities with Repairs
As mentioned, repairs under $10,000 are acceptable for FHA loans. However, the seller is responsible for completing any repairs noted by the appraiser before closing.
These necessary repairs typically involve:
- Safety issues like inadequate egress
- Major defects – leaky roof, foundation damage
- Updated paint surfaces in pre-1978 homes
Minor cosmetic fixes are not required. But appraisers will report these, and the buyer may request repairs via negotiations.
As the seller, it’s in your best interest to make sure the property is in good condition before listing. This prevents major issues coming up in the FHA appraisal.
Appliance and System Function
For appliances that remain with the home, the FHA requires they be in working order. This includes:
- Refrigerator
- Oven/range
- Dishwasher
- Garbage disposal
- Microwave
- Washer/dryer
The appraiser may test these appliances. If utilities are off during the inspection, they may request a re-inspection when services are active.
All systems – electrical, plumbing, HVAC – must also be functional. Making repairs prior to listing can prevent problems here.
Handling Low Appraisals
Occasionally an FHA appraisal will come in below the agreed purchase price. Since FHA buyers often have limited funds, this can jeopardize the sale.
As the seller, you have two options if the appraisal is low:
- Lower the purchase price
- The buyer covers the difference in cash
To avoid issues, work with your agent to set a reasonable list price. Be open to negotiations if the appraisal gaps the initial offered price.
FHA Condo Requirements
For condos, the entire complex must be approved by FHA. Before accepting an FHA offer on a condo, ensure the community is on the FHA condo approval list.
If not approved, the buyer’s lender must complete certification. This may take 30+ days, which could delay closing. In a tight market, you may opt for conventional loan offers to avoid this hassle as a seller.
Bottom Line
The bottom line is FHA loans present minor hurdles for sellers – but none that can’t be overcome. As long as you price competitively and maintain your home, FHA buyers can be a great option.
Focus on the offer strength, not loan type. With an understanding of FHA guidelines for sellers, you can better evaluate all offers and make an informed decision.
Learn About FHA Loans
Find out why FHA mortgages with low down payments are so popular with homebuyers.
FHA Loan Programs for 2024
The most recognized 3.5% down payment mortgage in the country. Affordable payments w/good credit.
HOME SELLING TIPS – FHA Loan Requirements For Sellers & Should You Consider An FHA Offer #FHA #bronx
FAQ
Why are sellers not accepting FHA loans?
What is the maximum seller paid for FHA loans?
What does the seller pay on an FHA loan?
What are the requirements for an FHA loan?
FHA loans have a set of requirements you must meet in order to qualify for an FHA loan. These include: The home must be your primary residence. You must have a minimum credit score of 500 (though most lenders require 580+).
Should a seller accept an FHA loan backed offer?
While they are **not legally obligated** to accept any specific type of offer, including those backed by **Federal Housing Administration (FHA) loans**, they do have the freedom to select the one that
Should you sell your home if you have an FHA loan?
Sellers who are serious about selling their home will evaluate all offers that come in, including those that are associated with an FHA loan. With that being said, a competitive seller’s market might alter the equation a bit.
Do FHA loans affect sellers?
The property being purchased with an FHA loan must meet all of the minimum property requirements established by HUD (the federal department that oversees this program). But aside from that, FHA loans don’t affect sellers very much. It’s just another form of financing. These loans tend to have a bad reputation among some sellers and listing agents.