FHA Appraisal Guidelines: A Checklist For Home Buyers

An FHA loan can help borrowers with low incomes or below-average credit buy homes. But with these benefits come certain requirements, including a home appraisal.

The Federal Housing Administration requires that all homes being purchased with FHA loans be appraised to verify the value of the home, to ensure it meets certain property requirements and ultimately to determine whether it’s eligible for an FHA-insured mortgage.

If you’re considering buying a home with an FHA loan, the appraisal process can feel overwhelming, but it doesn’t have to be. Keep reading to learn how this process works and what an appraiser will look for.

What Is An FHA Appraisal?

An FHA appraisal is a special type of home appraisal that’s required when using an FHA loan to purchase a home. A licensed appraiser will determine the market value of the home and make sure the house meets specific requirements for this type of mortgage loan program.

Appraisals are usually required when you’re buying a home with a mortgage, but FHA appraisals are a bit different. First, an appraisal when you’re buying with a conventional loan is intended to determine the fair market value of your home.

An FHA appraisal does that, but it also serves as a safety inspection. The U.S. Department of Housing and Urban Development (HUD) has specific property standards for health and safety that homes must meet in order to qualify for FHA loans. Your FHA appraiser will be looking out for any health or safety hazards to make sure you meet these minimum guidelines.

Your FHA Appraisal Guidelines Checklist

When you get an FHA appraisal, your appraiser will look at several aspects of the property to ensure it meets HUD standards. The sections below outline the standards the home must meet.

The Physical Building

During an FHA appraisal, the appraiser will examine the building’s interior and exterior for defects. Defective conditions that could make a home ineligible for an FHA loan include:

• Insect infestation, including termites
• Lack of roof, exterior and foundation integrity
• Inadequate ventilation throughout the home

Safety Features

To be financed by an FHA loan, an appraiser must find that a home is free of certain safety hazards. Hazards that are likely to catch an appraiser’s attention include:

• Poor lighting
• Lack of accessibility for the physically disabled
• Loose wiring or dangerous electrical systems
• Lead paint
• Lack of adherence to all building codes
• Poor sanitation

Livability

Finally, an FHA appraiser will assess issues pertaining to a property’s livability. Some of the conditions an appraiser will look out for include:

• Improperly functioning utilities
• A non-working HVAC system
• Failure to comply with the FHA’s definition of a “single-family” home (one to four units)

Getting An FHA Appraisal

The FHA appraisal is a necessary part of purchasing a home using an FHA home. You’ll typically get your appraisal within a week of having your offer accepted by a seller. It’s beneficial to do it as early in the process as possible to ensure there’s time to fix any issues that come to light during the appraisal.

The time it will take an appraiser to fully examine your potential property will vary depending on the size and condition of the house. An appraiser may take a few hours or just 45 minutes to check everything out. Once they’re done, you’ll typically get your full appraisal report back within a few days.

Once the appraisal is complete, it will be valid for 180 days. If you don’t close on your loan within this period, you may have to get another appraisal.

If the appraisal comes back and the home fails the health and safety requirements, you can’t get an FHA loan for the property unless the defects are remedied. You may be able to negotiate with the seller and request that they pay for repairs, or you can offer to pay for them yourself.

If the appraiser notes any defects, the property will require a final inspection to confirm that the repairs or modifications have been made. If any of the defects noted require a specialized inspection (think roof, plumbing, foundation, etc.), the appraiser will need a copy of the inspection report. It’s only once the home meets HUD’s guidelines that you can move forward with the purchase.

It’s also possible that the home could appraise for less than the sale price. If that’s the case, you may be able to back out of the sale if you have an appraisal contingency. Alternatively, you can proceed with the sale and either renegotiate the sale price or bring extra money to the closing to cover the difference between the home’s value and the loan amount.

FHA Appraisal FAQs

Before you buy a home with an FHA loan, read these important frequently asked questions about FHA appraisals.

How long is an FHA appraisal good for?

A home appraisal is good for 180 days. If you don’t close on your loan within this period, you may have to get another appraisal.

What if the property doesn’t meet FHA appraisal requirements?

An FHA loan can only be used for a home that meets the FHA appraisal requirements. If the home you’re buying doesn’t meet those requirements, you must either walk away from the sale, use a different type of loan or make the repairs necessary to meet the requirements.

How long does it take to get an FHA appraisal back?

Once you’ve had your FHA appraisal, it should only take a few days for you to receive the full report.

How fast is closing after appraisal?

The entire FHA loan closing process takes an average of 45 days. However, it could be longer or shorter depending on your specific situation and the results of an appraisal. Keep in mind that because the appraisal is only good for 180 days, you should make sure to close within that window.

The Bottom Line: FHA Appraisals Are More Involved But Protect Home Buyers

An FHA appraisal is an important and necessary part of buying a home with an FHA loan. Not only does it determine the home’s fair market value, but it also verifies that the home meets certain safety standards set by HUD.

If you’re considering buying a home, either with an FHA loan or any other type of loan, apply for mortgage approval today to get started.