By Brandon Cornett | © 2022, all rights reserved | Duplication prohibited

Notation: This page was updated in Jan 2022 and to include the latest data on FHA appraisal guidelines and requirements for 2022.

If you use an FHA loan to buy a house, the property volition have to be appraised and inspected past a HUD-approved habitation appraiser. This individual will determine the current market place value of the property, and will also inspect information technology to ensure it meets HUD'southward minimum property standards. Here is an overview of FHA appraisal requirements and guidelines in 2022, based on current policy handbooks.

Related: Guidelines for desktop and exterior-simply appraisals

What Is an Appraisal?

Permit's start with a quick definition. An appraisal is an expert assessment of a item product or asset (in this case a house) to decide its value. Within the context of FHA loans, the purpose of the appraisal is to determine the marketplace value of the home that is beingness purchased.

FHA appraisal overview

During this procedure, the appraiser will look at comparable properties that have sold recently, in the aforementioned area as the one being purchased. He volition also visit the "subject field house" and evaluate it both inside and out. Later this review process, the appraiser volition write a report to detail his findings. The study will include an estimated value of the home, also as whatever required repairs. The report volition and then be sent to the mortgage lender for review and further activeness.

How the FHA Process Is Different from a 'Regular' Transaction

Home buyers and homeowners are often surprised to find that FHA appraisement guidelines include detailed instructions for inspecting the property. This is different from a standard appraisement, where the appraiser mainly wants to know what the house is worth. When a Federal Housing Administration domicile loan is being used, the appraiser basically has to perform double duty.

Here are the chief differences:

  • Conventional: In a typical existent estate transaction, where a conventional (not-government-insured) home loan is existence used, the appraiser is mostly concerned with the current market value of the belongings in question. That is his primary objective when visiting the house. He is just concerned with the condition of the property as it relates to the value.
  • FHA: When an FHA loan is being used, the appraiser has two objectives. The Section of Housing and Urban Development (HUD) requires him to make up one's mind the current market value, equally with any appraisal. Simply they also require a property inspection to brand sure the dwelling house meets HUD's minimum standards for health and safety. This is the "double duty" mentioned earlier. It'southward what makes the FHA appraisement process unique.

So the chief departure between FHA and regular appraisals is the level of inspection that is required by HUD. If the HUD-approved appraiser flags sure issues -- such every bit peeling paint, loose handrails, or other safety issues -- those issues must be corrected before the loan volition be funded. In other words, the transaction will exist put on "hold" until the discrepancies are resolved. That is not the case with a regular appraisal used for a conventional dwelling loan.

Habitation buyers would exist wise to have a complete "regular" dwelling inspection dissever from the "wellness-and-prophylactic" inspection conducted by the FHA appraiser. HUD actually encourages this. All borrowers who employ this program have to sign a disclosure that says, "I empathise the importance of getting an independent habitation inspection. I take thought nearly this before I signed a contract with the seller for a habitation."

To analyze: HUD requires an appraisement (with a built-in health-and-safety inspection). They do non require a regular home inspection -- just they strongly encourage it. This is a source of mutual confusion amongst buyers and sellers alike.

Overview of FHA Appraisal Guidelines for 2022

Co-ordinate to the 2022 FHA appraisal guidelines, all properties existence purchased with an FHA-insured mortgage loan must be appraised by a licensed, HUD-approved home appraiser.

At a minimum, the appraiser must complete the post-obit steps:

  1. Visually inspect the field of study property both within and out.
  2. Take photos of the property to be included inside the loan file. The photos must show the sides, front and rear of the home, as well equally any value-adding improvements such as a puddle or patio.
  3. Accept a photo of each comparable sale transaction that is being used to support the appraisal.
  4. Obtain and provide a copy of a street map that shows the location of the property and each comparable sale, or "comp," used during the valuation.
  5. Take photos that show the grade of the lot, if it's a proposed construction.

These are the minimum steps that must be performed during an FHA habitation appraisal.

What Does the Appraiser Look for?

So, what does the FHA appraiser wait for during this process? The primary areas of inspection are the roof, the foundation, lot form, ventilation, mechanical systems, heating, electricity, and crawl spaces (when present).

Here are some of the key inspection areas required by HUD:

  • HUD'due south primary business is the wellness and safe of the home heir-apparent who will really live in the house. Thus, most of their appraisal / inspection checkpoints have to do with wellness and safe aspects of the property. To a higher place all, the habitation must be habitable and comfortable, without any potential hazards to the occupant.
  • The lot should exist graded in a way that prevents moisture from entering the basement and/or foundation. In other words, the lot should be sloped to allow water to bleed away from the house -- not toward information technology.
  • All bedrooms should accept egress to the exterior, for reasons of fire safety. A sleeping accommodation window will suffice, as long as it's large enough to permit egress.
  • Many homes built before 1978 still comprise lead-based paint, which is a potential health chance. In these homes, the appraiser will cheque for damaged pigment (peeling, chipping, etc.). Such conditions must be corrected before the loan will become through.
  • All steps and stairways must accept a handrail for safety. This is a unremarkably cited discrepancy during FHA appraisals.
  • The heating organization must be sufficient to create "healthful and comfortable living weather condition" inside the home.
  • The roof should be in a skillful country of repair and must go along moisture from inbound the home. It should "provide reasonable futurity utility, immovability and economy of maintenance."
  • The foundation should exist in good repair and able to withstand "all normal loads imposed" on it.

According to HUD Handbook 4000.1, the dwelling house "must exist free of all known hazards and adverse conditions that may affect the wellness and condom of the occupants."

The bottom is that if something poses a threat to the health and safety of the occupant, or to the construction itself, information technology will probably be marked every bit "subject to repair." This is the central theme that runs throughout the appraisal guidelines.

More: For a complete checklist of these and other appraisal requirements, refer to HUD Handbook 4000.1. You'll discover it on the HUD.gov website, and you tin also download information technology from our website.

Making Repairs After the Inspection

There'southward a common misconception that FHA appraisals are unnecessarily strict, and that whatever inspection "hits" will cease your chances of getting a loan. This is wrong. In fact, the health-and-rubber aspects of the FHA appraisal have gotten a fleck more than relaxed over the years. Additionally, well-nigh discrepancies are fully correctable. If they are corrected before the concluding inspection (when the appraiser follows up on the hit list), the loan tin can still movement forward.

In most cases, the simply "bargain breakers" are serious safety issues that cannot easily be corrected. An example would exist a chamber with no windows or doors, and therefore no egress in the event of a burn. Some other example would be an older habitation with a deteriorated roof and holes in the flooring (i.e., a fixer-upper). In both of these cases, the discrepancies (A) create chancy atmospheric condition and (B) cannot be easily fixed. These are the types of bug that ship FHA loans off the track.

In nearly cases, however, flagged discrepancies can be resolved fairly easily -- if the seller is willing to gear up them. If the items are repaired or corrected to the appraiser'south satisfaction, the deal can move forrad.

The official FHA appraisement guidelines for 2022 state this clearly: "Required repairs are limited to those repairs necessary to preserve the continued marketability of the belongings and to protect the health and safety of the occupants."

Where to Learn More than: HUD Handbook 4000.1

Nearly of the information in a higher place was adapted from HUD Handbook 4000.1. You lot can find more than information most HUD's appraisement guidelines for FHA loans in this particular handbook. It'southward available on the Department of Housing and Urban Development website, and also on the "HUD Guidelines" folio of this website (wait for that tab in the master bill of fare above).

If y'all actually want to acquire more about these appraisal requirements -- for instance, if you're a licensed appraiser and you want to get approved by HUD to inspect FHA properties -- you should refer to their "Mortgagee Letters & Handbook for Roster Appraisers." This is a collection of letters and handbooks that explain all belongings requirements and inspection procedures.