The program
The property and the appraisal
What the home has to be, what has to be inspected, and what has to be fixed before anyone closes.
What kind of home qualifies
| Eligible | Not eligible |
|---|---|
| 1 to 2 units | 3 or more units |
| Single family, townhome, attached, detached | Second homes, investment properties |
| PUD, modular, double-wide manufactured | Co-ops, single-wide manufactured |
| Condo with FHA approval, spot approval allowed | Communities restricted by age, race, gender or leasing terms |
| Fee simple and leasehold | That includes 55 and older communities |
The appraisal
A full FHA appraisal is required. It has to be marked as-is at the time of purchase, or carry a completion certificate or 1004D if the property was subject to repairs first.
The appraiser has to certify that the home meets FHA minimum property requirements and that no health, safety, or adverse conditions are present. The appraiser also has to certify that the property has no commercial influence, is not a working farm, and has no commercial agricultural income potential.
A cost approach to value is required. An automated valuation may be pulled to support the appraised value, and values have to land within 10% of the full appraised value. A gap wider than 10% triggers a request for supporting comps or a counter-offer on the sales price.
Source: Matrix 3.12, 3.12.2, 3.12.3.
Condition ratings decide how hard this gets
The appraisal has to state a condition of C1 through C4, or C5 or C6. C5 and C6 properties may be ineligible without significant repair or renovation.
Every property in C2 through C6 condition must have an independent inspection performed. Major defects have to be repaired before closing. Minor defects can be covered by an attestation, and a Cure Agreement may be used in place of certain major defect repairs when the underwriter instructs it.
Source: Matrix 3.12.1, 3.13.2.
What the inspection has to cover
Every major system
HVAC, plumbing, electrical, appliances, siding, major fixtures, and flooring. The list in the guidelines is explicitly not exhaustive.
The roof
It has to be in acceptable condition and good repair, with a useful life expectancy of at least 5 years.
Smoke and carbon monoxide
Tested and certified as operable per local building and health and safety codes.
Septic, separately
Septic systems need their own inspection, and they have to be pumped and inspected along with the drain field.
The electrical actually working
If electrical tests are not performed, it has to be confirmed that power meters are functioning and are not bypassed.
Wood destroying organisms
In areas with a very heavy or moderate-to-heavy probability of termites, a WDO report is required. Any evidence of infestation has to be remedied before closing.
A certified home warranty
Required on every transaction that requires a home inspection.
Inspections can never be waived
Not as part of the purchase contract, not to win a bidding war, not for any reason. If your agent suggests waiving the inspection to make the offer stronger, that offer will not work in this program.
Source: Matrix 3.13.3.
The repairs that fall on you
You will sign an attestation acknowledging that you received and reviewed the inspection, and that you are responsible for making all recommended repairs for minor defects over the course of twelve months after closing.
Read that sentence twice before you sign it. It is the difference between a renter's expectations and an owner's.
Source: Matrix 3.13.2.
The conditions that end a file
Fuse box or knob-and-tube wiring
Has to be updated to a breaker panel and standard wiring before closing. Not after. This one kills deals late, so check it at the showing.
Matrix 3.17.2Leased solar panels
Financed solar is fine if it is in the price. Leased solar is not currently acceptable. The lease must be transferred to the applicant or fully satisfied, and the payoff has to show in the purchase contract.
Matrix 3.17.5HOA that will not approve the occupancy
The HOA has to provide bylaws and CC&Rs addressing occupancy for contract-for-deed transactions. Some HOAs read it as non-owner occupied. If the HOA does not approve, the property is ineligible.
Matrix 3.17.43 or more units
One and two units only. Three or more is ineligible, full stop.
Matrix 3.3.2Age-restricted communities
Any PUD that restricts by age, race, gender, or leasing terms is out. That includes 55 and older communities.
Matrix 3.3.2Co-ops and single-wide manufactured
Both are ineligible. Double-wide manufactured, modular, townhome, PUD, and condo with FHA approval are all fine.
Matrix 3.3.1, 3.3.2Condition C5 or C6
May be ineligible without significant repair. Every property in C2 through C6 needs an independent inspection, and major defects get repaired before closing.
Matrix 3.12.1Roof with less than 5 years of life
The roof inspection has to show a useful life expectancy of at least 5 years, and the roof must be in acceptable condition and good repair.
Matrix 3.13, 3.12.1Commercial influence or a working farm
The appraiser has to certify the property has no commercial influence, is not a working farm, and has no commercial agricultural income potential.
Matrix 3.12Waived inspections
Inspections can never be waived as part of the purchase contract. Do not write the offer that way.
Matrix 3.13.3Florida without a 4-point and wind mitigation
Florida properties need a 4-point inspection with every unsatisfactory item fully repaired before closing, plus a wind mitigation report.
Matrix 3.13.5Homes built before 1901
Not ineligible, but they may take additional time to obtain the insurance binder. Build that into your timeline.
Matrix 3.12.1Special cases
Florida properties need a 4-point inspection with every unsatisfactory item fully repaired before closing, plus a wind mitigation report.
In counties declared disaster areas by FEMA, a 1004D disaster certificate or a 442 with exterior photos is required, dated after the incident period.
Homes built before 1901 are not ineligible, but they may need additional time to obtain the insurance binder. Build that into the timeline instead of discovering it at the end.
Source: Matrix 3.13.5, 3.17.3, 3.12.1.
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