Selling a home that needs workThe buyer's loan brings its own standard for the house
FHA, VA, USDA and Fannie Mae publish no repair list for a home that needs work. Each publishes a property standard instead, an appraiser reads the house against it for the loan, and the buyer's lender is the one to say which repairs that loan needs before it closes.
Four loan programs, four sentences about what a house has to be
Minimum Property Requirements refer to general requirements that all homes insured by FHA be safe, sound, and secure.
HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook
VA's Lender's Handbook, Pamphlet 26-7, says its Minimum Property Requirements exist to protect the interests of Veterans, lenders, servicers and VA, must be met before VA guarantees the loan, and help ensure the property is “safe, structurally sound, and sanitary.” VA titles its current chapter “Effective after May 1, 2026”.
USDA has two programs and two texts. For the guaranteed program, 7 CFR 3555.202 lists four criteria for an existing dwelling: structurally sound, functionally adequate, in good repair or to be placed in good repair with loan funds, and adequate and safe electrical, heating, plumbing, water and wastewater disposal systems. An existing dwelling is “considered to meet” them when inspected and certified as meeting HUD requirements for one-to-four unit dwellings under the agency's guidelines. For the direct program, 7 CFR 3550.57 sets its own list for existing dwellings, which adds that they be “free of termites and other wood damaging pests and organisms.”
Fannie Mae's Selling Guide grades condition from C1 to C6. C6 means defects “severe enough to affect the safety, soundness, or structural integrity of the improvements”, and one C6 portion makes the whole dwelling C6. C5 is obvious deferred maintenance where the dwelling “remains useable and functional as a residence.” Which kinds of property Fannie Mae buys loans on at all is a separate matter, covered by Fannie Mae's property line for a regular mortgage.
The loan's appraiser gives a first read, not a home inspection
An appraisal for a buyer's FHA, VA or Fannie Mae loan is a check made for the loan, not a home inspection, and each program's text describes its limits.
HUD Handbook 4000.1 makes the appraiser the lender's on-site representative, providing a “preliminary verification” that the property meets HUD's criteria and notifying the lender of deficiencies on an existing house. VA says “The fee appraiser will not perform operational checks of mechanical systems or appliances”, and its Notice of Value recommends that the Veteran may wish to obtain a home inspection. Fannie Mae adds that appraisers are not responsible for hidden or unapparent conditions.
What each handbook names, in its own words, and why none of it is the full list
Items a house can fail on are named in the FHA, VA and Fannie Mae texts themselves, and the table sets them side by side as partial lists, never a repair schedule.
| Program | Item | What the text says |
|---|---|---|
| FHA | Living unit basics | The living-unit list includes safe and potable water, sanitary facilities and safe sewage disposal, adequate heating, hot water, electricity and kitchen facilities. |
| FHA | Inspection triggers | Conditions that require an inspection by a qualified individual or entity include standing water against the foundation or excessively damp basements, hazardous materials, faulty or defective mechanical systems, evidence of possible structural failure or pest infestation, and leaking or worn-out roofs. |
| FHA | Roof | A roof covering that keeps moisture out, with at least two years of remaining physical life; under two years, the appraisal is made subject to inspection by a professional roofer. |
| FHA | Systems | Installed heat that automatically reaches a minimum of 50 degrees Fahrenheit in living areas; central air working if installed; no visible frayed or exposed wiring. |
| FHA | Septic | Visually observed; readily observable deficiencies mean repair or further inspection. |
| FHA | Paint | Before 1978, repair of all defective paint; 1978 or later, repair of exterior defective paint that exposes the subsurface to the elements. |
| FHA | Termites | Evidence of infestation, including a prior treatment, means inspection by a qualified pest control specialist. |
| VA | Water and sewage | Safe and potable water, hot water, sanitary facilities, safe sewage disposal; an individual water supply meets, among other tests, the health authority's requirements. |
| VA | Defects | Examples include continuing settlement, excessive dampness, leakage, decay and termites; conditions that impair safety, sanitation or structural soundness leave the property unacceptable until remedied “and the probability of further damage eliminated.” |
| VA | Heat and roof | Permanently installed heat keeping at least 50 degrees Fahrenheit in areas with plumbing, though the heating topic says heat may not be required in a mild climate. A roof covering that keeps moisture out. |
| VA | Paint | Before 1978, defective lead-based paint must be remediated; 1978 or later, defective paint is normally cosmetic. |
| VA | Wood-destroying insects | Apparent infestation or damage makes the appraisal subject to a wood destroying insect inspection, and all damage must be repaired; VA also lists Virginia as a state where this information is required statewide. |
| VA | Access | Safe access from a public or private street with an all-weather surface. |
| Fannie Mae | Minor conditions | Worn carpet, minor plumbing leaks, holes in screens, missing handrails and cracked glass are examples generally reported rather than required. |
| Fannie Mae | Infestation, dampness, settlement | The appraisal must comment on the effect on value and marketability, and the lender must show the condition was corrected or that a professional inspection finds no threat of structural damage. |
The same systems recur across the FHA and VA texts: water, sewage, heat, roof, structure, moisture and pests. The two-year roof figure is FHA's alone, and FHA and VA treat paint on newer houses differently. A seller's paperwork duty on an older house is separate, set out under lead paint disclosure.
As is or subject to repairs, and the next decision is not the appraiser's
An appraisal for a buyer's loan comes back either as is or conditioned on repairs or an inspection, and the FHA and Fannie Mae texts then leave the decision to the lender, while a VA repair waiver needs the lender's concurrence and VA's consideration.
FHA. An as-is appraisal of an existing house is allowed when minor deficiencies do not affect “the health and safety of the occupants or the security and soundness of the Property”; cosmetic items such as holes in window screens or cracked glass are reported, not required. When a house falls short, the appraiser conditions the appraisal on repairs, and then:
Regardless of the Appraiser's suggested repairs, the Mortgagee will determine which repairs are required.
HUD Handbook 4000.1
If repairs on an existing house cannot be finished before closing, the FHA lender may set up a repair escrow, provided the house is habitable and safe for occupancy at closing.
VA. Appraisals are made “subject to” repairs that appear needed; apart from the wood destroying insect inspection, appraisers “must recommend repairs, not inspections,” for conditions that do not appear to meet the requirements, and should not recommend repairs of cosmetic items. After the Notice of Value, VA “will consider” waiving repairs if the Veteran signs the request, the lender concurs and the property is habitable from the standpoint of safety, structural soundness and sanitation. Lenders may escrow funds for repairs after closing, but all repairs must be completed before VA guarantees the loan.
Fannie Mae. An as-is appraisal is permitted when conditions are minor, do not affect safety, soundness or structural integrity, and the value reflects them, and ratings C1 to C5 are eligible as is. By the Selling Guide, a C6 house is appraised subject to repairs bringing it to at least C5. A C6 loan is not eligible for sale to Fannie Mae, a rule about loans Fannie Mae buys, not about whether a house sells. Repairs generally must be complete when the loan is sold, though in some circumstances the lender may use the postponed-improvements rules.
These rules decide whether one program's loan can close on a house, never whether the house can sell. What an as-is clause means in a contract is answered under selling as is in Virginia, and what a seller must disclose is its own question, covered in seller disclosure. When the appraisal comes in low on an FHA or VA purchase, a contract that carries HUD's model amendatory clause leaves the buyer the option of proceeding anyway.
Three loans that finance the purchase and the repairs in one closing
A renovation loan folds a house's purchase and its repairs into one mortgage, and in the FHA and Fannie Mae texts the work is financed and has to be completed, not skipped.
FHA 203(k). HUD's program finances the purchase of an existing structure and the land under it, together with its rehabilitation. The Standard 203(k) may be used for remodeling and repairs, requires a 203(k) Consultant, and its eligible improvements “include, but are not limited to” structural repair, wells and septic, plumbing, heating and electrical work, and roofing. The Limited 203(k) covers only minor remodeling and nonstructural repairs, excludes what the handbook labels major rehabilitation, and carries a cost limit HUD reviews each year, which the lender can state. Under either type, the handbook says all improvements to existing structures must comply with HUD's Minimum Property Requirements and meet or exceed local building codes.
Fannie Mae HomeStyle Renovation. Fannie Mae's Selling Guide lets a borrower buy a house and include the costs of repairs, remodeling, renovations or energy improvements in the loan amount, but not for complete tear-down and reconstruction of the dwelling. The appraisal gives an “as completed” value. The collateral topic calls for a licensed contractor unless licensing does not apply to the trade under state or local law, also allows a separate do-it-yourself option, and says the lender may not choose the contractor. Fannie Mae's stated deadline for the work is 15 months from the date the loan closes.
Freddie Mac CHOICERenovation. Freddie Mac's product page describes borrowers “financing their home purchase and renovation costs in a single-closing transaction” and points to its Guide for the requirements.
For a seller, the result is a route. The buyer's lender is the one to say which repairs, escrows or renovation loans fit, with VA considering any repair waiver; the purchase contract, read by each party's attorney, sets who pays for and who performs a repair; Virginia's Department of Professional and Occupational Regulation (DPOR) says which contractor license applies. The listing side is laid out under selling your home.
A house that needs work, and what you already know about it
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Good questions, straight answers.
Is the appraisal for an FHA or VA loan the same thing as a home inspection?
No. HUD Handbook 4000.1 calls the FHA appraiser's work a preliminary verification for the lender. VA says its fee appraiser does not perform operational checks of mechanical systems or appliances, and VA's Notice of Value includes a recommendation that the Veteran may wish to obtain a home inspection.
Can a buyer's loan close before the required repairs are finished?
Sometimes, if the lender allows it. An FHA lender may set up a repair escrow when the house is habitable and safe for occupancy at closing. VA lets lenders escrow funds, but every repair must be completed before VA guarantees the loan.
Can a 203(k) loan be used on land alone, or a HomeStyle loan on a house that will be torn down?
No, not as the program texts read. HUD's handbook uses the 203(k) to purchase and rehabilitate an existing structure together with the land under it, so land alone is outside it, and Fannie Mae says HomeStyle Renovation may not be used for complete tear-down and reconstruction of the dwelling. Whether either program fits a particular house is for the buyer's lender to say.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook (Update 18) U.S. Department of Housing and Urban Development
- Model Amendatory Clause (March 2023) U.S. Department of Housing and Urban Development
- VA Pamphlet 26-7, Chapter 12, Minimum Property Requirements U.S. Department of Veterans Affairs
- VA Home Loans, Local Requirements (wood-destroying insect information by state) U.S. Department of Veterans Affairs
- 7 CFR 3555.202, Dwelling requirements (Single Family Housing Guaranteed Loan Program) eCFR
- 7 CFR 3550.57, Dwelling requirements (direct single family housing loans) eCFR
- Selling Guide B4-1.3-06, Property Condition and Quality of Construction of the Improvements Fannie Mae
- Selling Guide B4-1.2-05, Requirements for Verifying Completion and Postponed Improvements Fannie Mae
- Selling Guide B5-3.2-01, HomeStyle Renovation Mortgages Fannie Mae
- Selling Guide B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations Fannie Mae
- Selling Guide B2-3-01, General Property Eligibility Fannie Mae
- CHOICERenovation mortgage product page Freddie Mac