On this page
What happens when a property is being sold as-is and the seller will not do repairs but the home doesn’t meet FHA minimum property standards (MPS)? How does the buyer qualify for an FHA loan? It’s a great question and a situation that happens quite often.
It’s worth mentioning that the seller is limiting his or her buyer pool significantly by not being open to make repairs. Unless the buyer pays cash, there will probably be issues getting any kind of financing if the property deficiencies are major.
But because sellers often don’t want to put another penny into the home, here are some options on how to handle the situation.
Check your FHA eligibility (Oct 30th, 2026)
What is an FHA inspection?
Before a mortgage lender finalizes the FHA loan, they want to be sure the home is worth what the borrower is paying for it. A HUD-approved property appraiser will evaluate the safety, integrity, and value of the property and report it on an FHA form.
FHA Inspection Checklist
Here’s an overview of what the FHA appraiser considers when evaluating the home:
- Structure: Is the structure of the home in good condition? Is there dampness, decay or termite damage that might compromise the building integrity?
- Roofing: Does the roof have at least two years of life left? Does it keep moisture out?
- Heater, water and electric: Does each inhabitable room have an adequate heating source? (Regulations for this may vary depending on the severity of the local winters.) Does the water heater meet local building codes? Electric boxes should not be damaged or have exposed wires.
- Safety issues: The FHA appraiser will check for potential hazards, such as asbestos or contaminated soil.
- Location: The home must not be too close to a hazardous waste site. Also, proximity to excessive noise, like heavy traffic, high-voltage power lines or an airport, can prevent a home from meeting FHA guidelines.
For more information on the FHA minimum guidelines, see HUD Handbook 4000.1, the FHA Single Family Housing Policy Handbook.
Who checks FHA minimum property standards?
Appraisers approved to appraise for FHA financing know the FHA minimum property standards. When they see something that doesn’t meet FHA guidelines, they note it in the FHA appraisal. Until someone resolves the issue, the lender won’t issue final approval for the loan.
But sometimes, the FHA underwriter will notice something in the appraisal pictures and call for someone to fix it. The underwriter verifies compliance with FHA standards for the lender. Examples are peeling paint or a questionable roof.
Either way, someone has to fix the issues or there will be no FHA loan.
What if a home fails FHA minimum property standards?
To secure FHA financing for the property, someone will need to make repairs to the home. This could be the seller, the buyer, or occasionally the real estate agent. Without repairs, you may need to consider alternative financing options.
Option #1: The seller can make repairs
Even if the seller has said they won’t make repairs, they will sometimes come around if the necessary repairs are inexpensive or if they can do it themselves.
For instance, if chipping paint is the issue, the seller shouldn’t have any problem scraping the affected area and spending $50 on paint. It’s cheap and easy.
Give the real estate agents a copy of the home appraisal so they can see the issues first hand. The listing agent might be able to convince the seller to make repairs to meet FHA requirements in the interest of closing.
Click here to see if you're eligible for FHA financing (Oct 30th, 2026)
Option #2: The real estate agents make repairs
The real estate agents have a lot to lose if the transaction doesn’t close: their commission, which they usually collect only at closing. For this reason, it sometimes happens that agents come together to spend a few hundred or even a few thousand dollars to make sure the property meets FHA requirements.
This is rare and a risk for the agents since there is still a possibility that the loan won’t close.
In other words, don’t bank on the agents paying to make repairs, but it can happen.
Option #3: You make the repairs
Again, this is not an ideal way to handle the problem. You could spend a lot of money and effort, then the sale could fall through.
But buyers do sometimes pay for minor repairs just to get the house eligible for financing, and it has worked. Just take caution with this approach.
If you as the buyer are a licensed contractor, you may even be able to do some repairs yourself. It goes without saying you need to clear it with both agents and the seller before you try to gain access to the home or make any repairs to the home.
When the seller is a bank
When buying a foreclosure or real estate-owned (REO) home, the seller is often a bank that will not make repairs or grant access to the home so someone else can make them.
In this case, there is often no way to make repairs. An FHA mortgage may simply not be an option and you’ll have to consider other loan types. For example, a 5% down conforming conventional loan has less stringent property requirements than FHA. But if the property has major issues, it’s likely the mortgage lender will still require repairs.
Fannie Mae once offered HomePath financing on its foreclosed homes, with no appraisal or repair rules. It ended that program in October 2014, so a HomePath home now needs a regular loan. For more details, visit our Fannie Mae HomePath page.
Repair escrow
Some lenders will allow what’s called a repair escrow. Here’s how it works.
- The lender gets a licensed contractor’s bid for all the needed work.
- The lender adds the money for repairs plus any overruns into your closing costs.
- The lender will put that money in an escrow account to pay the contractor for the repair work after closing.
This option means the home is repaired to the lender’s satisfaction, and no work needs to be done prior to closing. But, keep in mind that not all lenders will do a loan with a repair escrow, and the home must be safe and livable at closing. Each lender sets its own limit on the size of a repair escrow.
Check your eligibility for repair escrow here (Oct 30th, 2026)
FHA 203k loan: Buy & repair a home with one loan
One program to buy a home and make repairs is the FHA 203k loan. You get bids for the repair work, and the repairs take place after closing. You can end up with one FHA loan with a low mortgage rate.
An FHA 203k loan even allows borrowers to make cosmetic fixes to the home while bringing the home up to FHA minimum property standards. The Limited 203(k) allows up to $75,000 in minor, non-structural repairs. The Standard 203(k) covers larger projects, including structural work.
Check FHA 203k rates and see if you qualify (Oct 30th, 2026)
If there are no solutions
If you’ve attempted all the above solutions and nothing has worked, it may be time to look at other homes. You can most likely withdraw your agreement to buy the home. Many purchase agreements include an inspection or financing contingency that lets the buyer back out without losing their earnest money. Check your contract and its deadlines, or ask your agent.
The FHA minimum property standards are there for a reason: to keep you from buying a lemon. The Federal Housing Administration created the FHA loan program to provide safe and long-term housing for home buyers. The FHA appraisal process aims to make sure the value of the home is consistent with the loan amounts and that you won’t regret buying the house later.
Check FHA rates and find out if you qualify for a 3.5% down FHA loan (Oct 30th, 2026)
