Your Guide to the FHA Appraisal: Requirements, Timeline, and Inspection FAQs

To obtain an FHA loan, your prospective home must undergo an appraisal. The appraisal ensures that the selling price matches the market value and that the home meets the FHA's minimum property standards for safety, security, and soundness.

Appraisals are required for most FHA loan types, including purchase, refinance, and reverse mortgages. The main exception is the FHA Streamline Refinance, which does not require an appraisal.

FHA-approved appraisers complete FHA appraisals and serve as independent third parties, providing unbiased property evaluations.

FHA Appraisal Requirements Checklist

The FHA has minimum property standards that guide appraisers when evaluating a home. These standards are designed to protect the health and safety of occupants, ensure the property is structurally sound, and ensure it is a good risk for FHA insurance.

FHA Appraisers follow very specific guidelines to determine whether a house is up to code, but here’s a general checklist of what they look for:

• House Structure: Foundation, walls, roof, and framing are free of major defects, including cracks, shifting, sagging, rot, or compromised load-bearing components.

• Utilities & Safety Features: Essential utilities (water, electricity, and heating/cooling) work properly. Smoke detectors and carbon monoxide detectors are present.

• Property Size & Zoning: Property size and zoning comply with local regulations.

• Home Accessibility: The home has safe entry and exit points and adequate vehicular access.

• Comparable Sales: Recent comparable sales are used to determine market value.

• Environmental Factors: No environmental hazards, such as flood risks, soil contamination, or pest infestations, are present.

Please note that this checklist provides a general overview, and the specific requirements and guidelines for FHA appraisals may vary. If a home fails to meet these standards, it may not pass an FHA appraisal.

Common issues that may cause a property to fail an FHA appraisal include:

• Significant structural problems

• Peeling paint

• Safety hazards, like exposed wiring or a lack of smoke detectors

• Extensive water damage or mold

• Pest infestations

• Inadequate utilities

• Environmental hazards, such as flood zones or soil contamination

• Non-compliance with building codes

• Zoning or size issues that don't meet residential use requirements

Many of these issues overlap with what a home inspection may uncover. However, home inspections are typically more in-depth and can reveal hidden or developing repair needs that an FHA appraisal may not identify.

FHA Appraisal Timeline

The appraiser will spend anywhere from forty-five minutes to several hours evaluating a home. Once the appraisal is complete, the report is usually ready within 7 to 10 business days.

The appraisal process involves:

1. Scheduling the appraisal appointment

2. The appraiser visits the property to conduct the home appraisal

3. The appraiser prepares the report and submits it to the lender for review and consideration

It's important to note that factors such as the property's location, property type (e.g., single-family home versus multi-unit property), and any potential issues or complications that may arise during the FHA appraisal process can affect the timeline. Keep in close contact with your agent and lender for the most accurate updates.

FHA Appraisal vs. Home Inspection

While FHA appraisals and home inspections serve different purposes, they both play an important role in the homebuying process. In fact, some FHA appraisers include inspection orders in their appraisal reports if they would like a further inspection of a particular aspect of the property.

Home inspections give buyers a more comprehensive evaluation of the property's overall condition. Home inspections can help buyers make informed decisions about the property, assist in price negotiations, and identify potential issues or repairs beyond the FHA's minimum property standards.

There are some key differences between the two:

The FHA appraisal and a home inspection also share several similarities:

• Both processes consider safety and security when assessing the home's systems.

• The appraisal and the inspection (if completed) contribute to the lender's decision-making process for approving the FHA loan.

• Borrowers are responsible for the costs of an FHA appraisal and, if applicable, a home inspection.

What Home Inspectors Look For

Because appraisers focus on FHA minimum property standards and value, home inspections are still valuable to examine the home’s overall condition, including:

• Structure: Foundation, framing, load-bearing components, and any structural modifications or additions that may affect stability or code compliance

• Electrical Systems: Outlets, grounding, electrical panels, and potential safety hazards such as outdated or improper wiring

• Plumbing: Pipes, fixtures, water pressure, drainage, and signs of leaks or water damage

• HVAC: Heating and cooling systems, including functionality, efficiency, and maintenance concerns

• Roof and Attic: Roof condition, signs of leaks or damage, attic insulation, and ventilation

• Appliances and Additional Systems: Major appliances and, when applicable, systems such as septic tanks, wells, or sprinklers

• Cosmetic Issues: Minor concerns that may not affect FHA approval but can inform buyer decisions, such as peeling paint, cracked tiles, or worn fixtures

While a home inspection offers a more comprehensive evaluation, it doesn’t replace an FHA appraisal, which focuses on property value and compliance with minimum property standards.

FHA 203(k) Appraisal vs. Inspection

An FHA 203(k) loan allows borrowers to finance a home purchase or refinance, along with renovation costs, in a single mortgage.

Even for the 203(k) loan, the FHA does not require an inspection. However, an appraisal is still required. The appraiser evaluates the property’s current value, its projected value after repairs, and whether the planned renovations will meet FHA guidelines.

The lender uses this appraisal to determine the final loan amount and set up an escrow account for the renovation funds.

The FHA Flip Rule and Second Appraisal Requirement

The FHA flip rule applies to properties resold shortly after being purchased. If the property is resold within 90 days of seller acquisition, it must meet a valid exception as defined by FHA, or the sale is not allowed, even with a 2nd appraisal to help confirm the property’s value and reduce the risk of inflated pricing.

If the previous sale occurred between 91 and 180 days prior to contract execution, the lender must confirm the seller's acquisition cost to determine whether a 2nd appraisal is required.

When required, the second appraisal is typically ordered at the seller’s expense, and a different FHA-approved appraiser must complete the appraisal. In some cases, this requirement may be waived, such as when the resale price falls within allowable limits compared to the seller’s original purchase price.

FHA Appraisal Frequently Asked Questions