More than 50 million families have become homeowners by using loans insured by the Federal Housing Administration (FHA). These families tend to have low to moderate incomes and the vast majority of them are first-time home buyers. However, misunderstandings about the FHA mortgage, and in particular its minimum property requirements (MPRs), often keep these buyers from living in their dream homes. Home sellers and real estate agents often go by myths rather than facts about FHA mortgages, disadvantaging both FHA buyers who are rejected in competitive markets and sellers who skip high FHA offers in favor of lower cash or conventional loan offers. 

Recently, CFA responded to a U.S. Department of Housing and Urban Development (HUD) request for information about MPRs for single-family homes: our recommendations to HUD about improving the MPR program are outlined below. We also share why MPRs are often misunderstood, how our previous research sheds light on the challenges facing FHA buyers, and the full comment letter we submitted to HUD. 

What Are the Minimum Property Requirements of FHA?

Put simply, the minimum property requirements are just that: a set of basic standards for safety, health, and habitability that help protect homebuyers from unforeseen repair costs after purchasing a home. These include examples such as working electrical, heating, and cooling systems and adequate roofing that will last the foreseeable future. Buyers protected in this way are less likely to go into default or foreclosure, which also protects the FHA Mutual Mortgage Insurance Fund (MMIF) from having to pay investors in the case of default. 

Despite these benefits, home sellers and their real estate agents tend to be wary of FHA-insured loans because of the MPRs. They are often perceived as being unusually burdensome, potentially requiring extensive repairs, and leading to delayed or failed closings compared to conventional financing. 

How Myths and Stigma Surrounding FHA Impact Homebuyers

In 2024, CFA published extensive research on the experiences of FHA borrowers in competitive housing markets, focusing on the tight housing conditions of the COVID-19 pandemic. Although these market conditions were unusual, this research documented a problem that remains relevant today: misconceptions surrounding FHA financing — in particular the appraisal process and MPRs — place FHA borrowers at a competitive disadvantage. 

CFA’s research identified three common consumer outcomes associated with these misconceptions: 

1. Higher purchase prices. FHA buyers often felt compelled to submit offers well above asking price to offset the perceived disadvantage of FHA financing when compared with cash and conventional offers. 

In quantitative research on the Massachusetts real estate market, CFA found that communities with higher shares of FHA buyers also experienced significantly higher levels of overbidding during the pandemic. This practice may have been the only option for buyers to overcome the stigma of an FHA bid compared to conventional offers, including the stigma of the MPRs and potential closing delays. 

2. More limited housing choices. As markets got more competitive, CFA found that FHA buyers became more limited to buying in neighborhoods where sellers and real estate agents were already familiar with FHA financing.

FHA purchase lending disproportionately declined in communities that had historically made little use of FHA financing, while becoming more concentrated in neighborhoods where sellers and real estate agents were familiar with the product. In Massachusetts, this pattern was particularly pronounced among white FHA borrowers, who had been more likely to use FHA mortgages in low-FHA communities prior to the pandemic.

3. Delayed or forgone homeownership. After repeatedly losing out in bidding competitions, some prospective homebuyers delayed or abandoned their homeownership dreams altogether, a trend that has also been reported in the media. 

This phenomenon is particularly worrisome since housing markets are often most competitive in places and at times when homeownership is especially attractive: in the highest-opportunity neighborhoods or during periods of low interest rates, for instance. This causes FHA buyers to miss out on the best opportunities to become homeowners and build financial stability. 

CFA’s Recommendations to HUD to Improve the FHA Program and MPRs

Based on these data-driven insights, CFA offered three key recommendations to HUD. These seek to help address widespread myths around the MPR and help improve the effectiveness of the FHA program while maintaining essential consumer protections: 

1. FHA should publish a plain-language Minimum Property Requirements checklist and reorganize MPR guidance. 

Currently, the only comprehensive description of the MPRs available on HUD’s website is in the 1,800-page Single Family Handbook, scattered throughout hundreds of pages. This makes these requirements difficult to locate and understand for anyone other than trained FHA professionals and appraisers. 

We recommend that HUD publish a concise, publicly available checklist summarizing the MPRs on its website, in order to provide home sellers, homebuyers, housing counselors, real estate agents, appraisers, and lenders with a reliable source of information. Increasing transparency would reduce misconceptions about FHA mortgages, helping sellers and real estate agents better understand what to expect when considering offers from FHA borrowers.

2. FHA should publish regular performance data on closing timelines and outcomes for FHA purchase loans. 

CFA research has found that many real estate agents continue to perceive FHA mortgages as “riskier” and “hard to close,” a perception also documented by the National Association of Realtors. As a result, real estate agents often advise home sellers against taking FHA offers, even if they are the highest bids. However, industry data shared with CFA indicates that closing timelines between FHA and conventional purchase loans closely match each other. In 2024, both averaged 46 to 47 days to close.

We recommend that HUD publish quarterly data comparing closing timelines for FHA and conventional purchase mortgages and include these statistics in FHA’s Annual Report to Congress. To the extent possible, HUD should also publish information on the frequency of appraisal repair conditions, re-appraisals, and common causes of transaction delays to help distinguish FHA myths from reality. 

3. FHA should expand opportunities for post-closing repairs for minor deficiencies.

Although there can be major health and habitability concerns in homes, not every property condition not meeting the MPRs warrants a delay in closing. Where deficiencies do not present an immediate health or safety hazard, FHA should expand opportunities for repairs to be completed after closing through repair escrows and other post-closing repair mechanisms. This approach could apply to smaller deficiencies, such as localized peeling paint, certain handrail repairs, or egress issues that can be resolved through simple modifications. 

Providing greater flexibility for minor repairs would reduce unnecessary closing delays and limit repeat appraisals and re-inspections (and their costs). Doing so would also improve the competitiveness of the FHA program, without compromising on protecting consumers from health hazards or unforeseen costs. 

These recommended reforms would directly address longstanding misconceptions surrounding FHA mortgages, making FHA offers more competitive and helping millions more buyers achieve their hopes of homeownership.