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.

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.)

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

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.

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

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.

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

Observe attic spaces and crawl spaces for any visible issues.

Make sure they meet the following criteria:

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.

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.

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

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

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.

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.

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

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.