HUD requires that any home being financed with an FHA mortgage meets the FHA’s Minimum Standards. In order for a loan to be granted, the property must be deemed safe, secure, and sound.
FHA Minimum Standards require that your home be safe for its occupants, provide security of the property, and be sound, without physical deficiencies or conditions affecting its structural integrity. The HUD has set factors for appraisers to look into—for example, accessibility, site conditions, and the materials used—to determine whether the requirements are met, and they vary for different types of structures, such as single-family detached homes, condominiums, etc. Appraisers submit their reports on FHA appraisal forms that list their observations, which result in the approval or dismissal of the mortgage application.
Enforcing these minimum standards is a way in which lenders are protected from incurring losses. Since your home is serving as collateral for the loan, it gives lenders security that it will sell easily and fetch a higher price in the event of a foreclosure. It also means that you, as the buyer, will make a greater effort to avoid defaulting on your mortgage, since the house is worth more and is a safe place to live.