FHA Appraisal and Inspection: Guidelines and Requirements

By Suntel Global

When applying for a Federal Housing Administration (FHA) loan, one essential step in the homebuying process is the FHA appraisal. This crucial step not only helps determine the market value of a home but also ensures the property meets minimum safety and livability standards set by the U.S. Department of Housing and Urban Development (HUD).

At Suntel Global, we’re here to simplify complex real estate topics. In this article, you’ll learn what an FHA appraisal involves, how it differs from a home inspection and what to expect after the appraisal is completed.

What Is an FHA Appraisal?

An FHA appraisal is a professional evaluation conducted by an FHA-approved appraiser. It serves two main purposes:

• Estimate Market Value: Determines the fair market value of the home, ensuring the loan doesn’t exceed its worth.
• Evaluate Safety and Habitability: Confirms the home meets HUD’s Minimum Property Standards for livability and safety.

Because FHA loans are federally backed, their appraisals are more stringent than those for conventional loans.

Why FHA Appraisals Are Important

FHA loans are attractive to first-time buyers and those with lower credit scores. However, appraisals ensure:

• The loan amount matches the home’s market value.
• The property is safe, secure, and structurally sound.

If these standards aren’t met, repairs may be required before loan approval.

FHA Appraisal vs. Home Inspection: Know the Difference

• FHA Appraisal: Required for loan approval; checks value and basic safety.
• Home Inspection: Optional; offers detailed insight into property condition for buyers.

Think of the appraisal as a financial safeguard for lenders, while the inspection protects the buyer’s interests.

The FHA Appraisal Process: Step-by-Step

1. Property Visit: The appraiser reviews visible elements like the roof, heating and electrical systems.
2. Comparable Market Analysis: The appraiser compares recent local sales to estimate value.
3. Condition and Safety Check: Checks for health and safety concerns that could affect loan approval.

What FHA Appraisers Look For

Health and Safety Concerns

• Peeling or chipping paint (especially pre-1979 homes)
• Exposed or unsafe electrical systems
• Damaged roofs or broken windows
• Unsecured doors or missing handrails
• Non-functional HVAC or plumbing systems
• Mold, water damage, or pest infestation
• Hazards like nearby fuel tanks or power lines

Lead-Based Paint Rules

For homes built before 1979, appraisers must check for lead-based paint. Peeling paint must be remediated before loan approval through repainting, siding, or sealing.

What Happens After the Appraisal?

1. The Value Meets or Exceeds the Sale Price: Loan processing can proceed as planned.
2. The Appraisal Comes In Low: Options include:
   • Renegotiating the price
   • Paying the difference in cash
   • Cancelling the contract (if contingencies exist)
3. Repairs Are Required: Safety-related issues must be resolved before closing, though minor ones might be deferred via escrow holdback.

FHA Appraisal Checklist: What’s Reviewed?

• Roof condition and drainage
• Foundation strength and stability
• Exterior walls, doors, and windows
• Plumbing and electrical systems
• Heating and cooling system functionality
• Attic and crawlspace access
• Evidence of water intrusion or moisture

Tips to Prepare for an FHA Appraisal

• Turn on All Utilities: Ensure water, heating, and electrical systems are operational.
• Clear Access Points: Give the appraiser easy access to all areas of the property.
• Fix Minor Issues: Resolve simple repairs like missing handrails or exposed wires.
• Secure Pets: Remove or contain animals during the visit.

Final Thoughts: The Value of FHA Appraisals

FHA appraisals play a critical role in ensuring the property is safe, livable, and worth the investment. They protect both the lender and borrower from financial and structural surprises.

At Suntel Global, we help guide homebuyers, sellers and refinancers through every step of the appraisal process. Understanding these guidelines helps you prepare effectively and avoid unnecessary delays.

Need help with your FHA loan or preparing for an appraisal? Contact our experts today for personalized guidance and support.