FHA Appraisal Guide | Everything You Need To Know

If you’re planning on selling your property or refinancing with an FHA loan, compliance with FHA appraisal guidelines is required by your lender.

In this article, we’ll review exactly what the appraiser will check for during their inspection so you can prepare your property accordingly and avoid any surprises or delays.

The data included in this checklist is taken directly from the FHA Single Family Housing Policy Handbook 4000.1. This is what appraisers use to determine property acceptability and which repairs or other requirements to call for.

image of fha handbook for an fha appraisal

Utilize this FHA Appraisal Checklist for compliance to make sure your property will meet the minimum property standards set forth by FHA.

This criteria applies to residential properties containing one to four family units and condominium units.

(Manufactured homes have additional requirements to be eligible for FHA financing.)

Disclaimer: Our articles are written by a Licensed or Certified Residential Appraiser. This information is meant for educational or informational purposes only, and does not support or indicate an opinion of value for your home or property, nor does it provide any type of value indication for a lender, attorney, realtor, or any other individual or entity.

Loan Types That Require an FHA Appraisal

FHA Purchase

There is no option for an appraisal waiver if your home is being purchased with an FHA loan.

FHA Cash-out Refinance

If you’re borrowing more than you currently owe to use your homes equity, an appraisal will be required with an FHA cash out refinance.

FHA 203k Loan

An appraisal is required for this type of fixer-upper loan, in order to estimate the home’s value once the renovations are complete.

FHA Reverse Mortgage

This is a loan intended for borrowers over 62 years of age. An FHA appraisal is required to determine how much equity the home currently has.

RELATED: WHY DO I NEED AN APPRAISAL?

General Requirements

Onsite Hazards

The appraiser must report the presence of onsite hazards and nuisances. These refer to any conditions that may endanger the health and safety of the occupants or marketability of the property.

These include things like mold, mildew, radon gas, and other apparent hazardous materials.

Utility and Drainage

Verify the property’s distance from high-pressure gas or liquid petroleum pipelines.

Ensure proper drainage away from the foundation to prevent water pooling.

Look for grading and drainage problems and ensure positive drainage away from the home.

Access to the Property

The appraiser must confirm safe pedestrian access and adequate vehicular access to the site. Adequate vehicular access refers to an all-weather road surface over which emergency and passenger vehicles can pass at all times.

Living Areas

Each unit should have a sufficient supply of safe water and sanitary facilities.

Every living unit must have at least 1 bathroom which must include at least a bathtub or shower, and lavatory.

FHA does not have a minimum size requirement for one to four unit homes and condos.

The appraiser must ensure that finished basements and unfinished attic areas are not included in the total gross living area.

Heating and Cooling Systems

Heating systems should provide adequate heat to all areas. (Areas without an adequate heat source will not be included in the home’s square footage, but may still add value to the property.)

If installed, central air conditioning should be operational.

Appliances and Amenities

Appliances that contribute to the home’s value should be in working condition.

Existing swimming pools must be operational and provide full contributory value. (In off seasons, pools are assumed to be in functional working order unless otherwise indicated or apparent.)

Plumbing and Electrical Systems

a minor plumbing repair for fha appraisal

Check for visible damage or deficiencies in plumbing and electrical systems.

Flush toilets, operate faucets, and check that water pressure is sufficient.

Water heater must have a temperature and pressure relief valve with piping to safely divert steam or hot water. Some areas also require water heaters to be strapped in 2 locations.

Roof Requirements

Inspect the roof for deficiencies – remaining life should be 2 years at a minimum.

Repair or replacement will be required if there appears to be less than 2 years remaining.

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Attic and Crawl Space

Observe attic spaces and crawl spaces for any visible issues.

Make sure they meet the following criteria:

Crawlspace floor joists must be sufficiently above ground level to provide access for maintenance

Crawlspace and attic must be free of debris and vermin and should not be excessively damp. If moisture problems are evident, a vapor barrier or water prevention must be required.

If there is NO access, the appraiser will report a lack of accessibility in the report. There is no requirement to cut open walls, ceilings, or floors to meet this requirement.

Defective Paint

If the property was built after 1978, the appraiser must report all defective paint surfaces on the exterior and require repair of any paint that exposes the subsurface to the elements.

If the property was built prior to 1978, the appraiser will note the location of all defective paint areas and require repair due to the possible existence of lead paint.

This includes all interior and exterior surfaces, as well as deck, porch, railings, windows, doors, fences, detached buildings, etc.

Well and Septic Systems

The Federal Housing Administration (FHA) has guidelines for the distance between wells and sources of contamination.

Check to make you comply with these rules to avoid issues during the FHA appraisal.

well distance requirements for fha appraisal

Required Testing

The appraiser will require testing of components if any of the following are noted:

The water system relies on a water purification system

Corrosion of pipes is apparent

Areas of intensive agriculture within one quarter mile

Coal mining or gas drilling within one quarter mile

A dump, junkyard, landfill, etc. within one quarter mile

An offensive taste, smell, or appearance of water

Security & Safety Features

The appraiser must report when property has security bars on bedroom windows or doors.

Have smoke detectors installed in appropriate areas.

Make sure carbon monoxide detectors are present.

Check that all stairways have adequate handrails for safety.

RELATED: COMMON APPRAISAL QUESTIONS

Cosmetic Repairs

The appraiser can complete the appraisal as-is and avoid requiring repairs for certain cosmetic items or for normal wear and tear.

Per the FHA Handbook, certain cosmetic or minor repairs are not required, but should be reported and considered in determining the overall condition of the property.

list of cosmetic repairs not required for fha appraisal

In case of potential safety, soundness, or security issues that are beyond the appraiser’s ability to assess, the lender will be notified and an inspection will be requested by a qualified party.

Pro Tip: When making an offer to purchase a home with an FHA loan, you are required to sign an FHA amendatory clause. This allows you to back out of the loan if the appraised value does not meet, at a minimum, the purchase price of the home. The seller must then return any earnest money deposit paid.

Basics of FHA Loans

FHA loans are government-backed mortgages insured by the Federal Housing Administration. They are designed to help first-time homebuyers and/oror those with lower credit scores and income. The following are some basic guidelines for FHA loan approval:

Down Payment: As low as 3.5%
Credit Score Requirements: Minimum 580 for maximum financing
Mortgage Insurance: Required, regardless of down payment amount
Loan Limits: Varies by county

More on FHA loan requirements

The Bottom Line

Taking care of these items before listing your home will not only facilitate an appraisal without costly repair requirements, but will also reflect well on the property’s maintenance and appeal to prospective buyers.

Remember, the effort put in to prepare for an FHA appraisal can pay off significantly when it’s time to finalize the sale.

Frequently Asked Questions

Is an FHA appraisal the same as a home inspection?

No. An FHA appraisal is intended to confirm the safety, security, and soundness of the home in consideration of determining its market value.

A home inspection is a more in depth analysis of the homes components and their functionality, and does not assign a value to the property.

FHA does not require a home inspection be completed.

What does an FHA appraisal cost?

An FHA appraisal typically costs between $400 and $700. The price may vary depending on the complexity of the property.

Most conventional appraisals cost slightly less at $300 to $500.

MORE ON APPRAISAL COSTS

What happens if my appraisal comes in low?

If you’re appraisal comes in low and you disagree with the outcome, you may appeal the decision by submitting a request for a “Reconsideration of Value.”

This request can be made to the lender (not the appraiser directly) and should include additional evidence and support such as recent home improvements, additional sales to consider, or mistakes noted within the appraisal report.

FHA purchases also include an amendatory clause that allows the buyer to back out if the appraised value does not meet the agreed upon purchase price.

How long is an FHA appraisal good for?

An FHA Appraisal is valid for 120 days. In some situations, the appraisal can be extended for an additional 30 days.

Does FHA require two appraisals?

In “home flipping” situations, or in other cases when the home is being re-sold within 90 days of its last sale, the lender may require a second appraisal be completed by another appraiser.

The second appraisal is not typically paid by the buyer.

Reverse mortgages may also require a 2nd appraisal.

What happens after the FHA Appraisal inspection?

After the appraisal is complete, your next steps depend on the findings within the report. If everything’s fine, you proceed with your loan and schedule the closing as planned.

If issues arise, repairs may be needed before loan approval. Your contract will determine who is obligated to cover repair costs.

In some cases, you can still buy if you agree to fix later. For financing a home with known repairs, look into an FHA 203(k) loan.

K Welch

Kimberly has been a Certified Appraiser in New York since 2004. With a background in the mortgage industry and prior licensure as a real estate agent, she brings a valuable perspective to buyers, sellers, and other industry professionals. Aside from her professional role, she’s an entrepreneur, novice home flipper, and proud mom of three.

License No. 45000046311 | FHA Certified | Member GSAR/NYSAR | Approved Supervisory Appraiser