Must ALSO have a conventional heat source in all living areas. Must also have a heat source to maintain 50 degrees F in rooms where plumbing is located. (Example: electric baseboard heat in bathroom, kitchen and basement/crawl space where plumbing pipes are located.)
HVAC Appraisal Rules
An FHA appraiser is likely to require corrections if a “permanently installed” HVAC systems does not do the following: Automatically heat the living areas of the house to a minimum of 50 degrees Fahrenheit. Provide healthful and comfortable heat. Rely upon a fuel source that is readily obtainable.
- A permanently installed heating source may: - include forced air heating, radiant heat, baseboard units heated by electric, or installed wall units. - have an electric, gas, or oil energy source. - fireplaces or wood stoves.
The property needs to be free of known hazards that affect health and safety, the home's use, or may affect the structural soundness of the house and its marketability. These include, but are not limited to: Toxic chemicals. Radioactive materials.
If the resident controls the heat, the equipment must have the capability of providing heat to at least 68 degrees Fahrenheit. At no point should indoor temperatures in public housing units drop below 55 degrees.
General: ALL habitable rooms must have a heat source. This does not mean that each room must contain a heating device but that each room must receive sufficient heat.
Major structural issues that are common FHA red flags include cracked or crumbling foundations, deteriorating roofs, and water damage. Other red flags that appraisers look for include: Missing handrails. Cracked windows.
Either the seller will have to tend to these repairs or the buyer must pursue alternative funding options, such as an FHA 203(k) Loan. Common issues that may result in a failed inspection include: Heating, plumbing, or electrical issues. Leaking, damaged, or inadequate roofing.
Simply stated, FHA requires an appliance to be operational only if it remains with the property and it has value and is included in the appraisal. The good news for appraisers is that if the appliance is not included in the valuation, it is not required to be operational.
Advantages – Fueled by either gas or oil, a Forced Hot Air (FHA) system is a fairly simple design, thus the most affordable and versatile. An element within the furnace unit is heated or cooled, then air is blown through this thermostatically controlled device and distributed throughout the home using duct work.
Sunlight is an obvious source of heat for homes. In addition, low-wavelength, non-visible infrared radiation can carry heat directly from warm objects to cooler objects. Infrared radiation is why you can feel the heat of a hot burner element on a stovetop, even from across the room.
Reasons for an FHA Rejection
There are three popular reasons – bad credit, high debt-to-income ratio, and overall insufficient money to cover the down payment and closing costs of a home.
A general guide followed by most lenders in the local area defines a permanent heat source as a heating unit appropriate for the GLA of the dwelling, hard-wired into the electrical system of the home and thermostatically controlled.
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
The overall structure of the property must be in good enough condition to keep its occupants safe. This means severe structural damage, leakage, dampness, decay or termite damage can cause the property to fail inspection. In such a case, repairs must be made in order for the FHA loan to move forward.
Homes that may not pass an FHA inspection
Health and safety concerns: Properties with potential health and safety hazards, such as lead-based paint, asbestos, or mold, may not qualify for an FHA loan.
Any significant issues — such as leaks, rotting wood, dampness, or termite damage—can result in a failed inspection. It's essential that all required repairs be addressed quickly, as structural problems are a major red flag for FHA loan approval.
If you're currently in the market looking to buy a triplex or fourplex with FHA financing, you need to see if the property's rents pass the Self-Sufficiency Test. To be “self-sufficient” means that 75% of the property's rents need to cover the monthly payments.
Can Home Sellers Refuse Offers Backed By An FHA Loan? Unfortunately, yes, they can. In a competitive seller's market, a home's seller might have their pick of many offers. They may even be able to choose an all-cash offer and avoid dealing with the mortgage process altogether.
FHA Loan: Cons
Here are some FHA home loan disadvantages: An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan's value. The MIP must either be paid in cash when you get the loan or rolled into the life of the loan. Home price qualifying maximums are set by FHA.
FHA determines loan limits using the national conforming loan limit — 115% of local median home prices — as a baseline. For 2025, the “floor” in California is set at $524,255, or 65% of the conforming loan limit, and the “ceiling” is set at $1,209,750, or 150% of the conforming loan limit.
The Land. If you already own a plot of land on which you intend to build a home, you are a step ahead in the process. Your land equity will cover the down payment requirement (3.5% minimum for FHA loans). You might need to purchase the lot; in which case it is important to think long term.