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How much do you really know about the home loan appraisal process? Some call it an inspection, and it’s definitely NOT an inspection--rather a check to make sure the property meets minimum standards for safety and habitability. It is also meant to establish the fair market value of the home.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

What You Should Know About the FHA Appraisal

April 25, 2022

What You Should Know About the FHA Appraisal
How much do you really know about the home loan appraisal process? Some call it an inspection, and it’s definitely NOT an inspection--rather a check to make sure the property meets minimum standards for safety and habitability. It is also meant to establish the fair market value of the home.

FHA Appraisals: Useful for the Lender, not the Borrower

The FHA appraisal is a tool for the lender. It has little utility for the borrower. What some house hunters don’t realize? The appraisal process does not require the appraiser to be an expert in all systems of the home, and that is one reason why calling it an “inspection” can be unintentionally misleading.

Your roof may have problems the appraiser can’t identify, or the heating and air conditioning system might be experiencing issues that are unfamiliar to your appraiser. In some cases, the appraiser might not even look inside a building to be appraised.

It’s not the appraiser’s job to inspect the home in the same way as an actual home inspection--and that’s what some don’t realize.

FHA Appraisal “Comparables”

Your home is not appraised all by itself. Your lender needs to know how the property compares to other houses like it in your housing market. A lack of comparables can be an issue--that’s one reason why it can be difficult to get certain types of home loans for more recent housing trends like tiny homes, barndominiums, etc.

FHA Appraisals and Local Building Code

The FHA does not have an exhaustive list of potential appraisal issues. It has a list of minimum standards but the FHA and HUD also rely on state/local building codes. If an aspect of the home you want to buy worries you (as in, whether or not it will “pass” the appraisal) you should refer to state and local code to see if it’s acceptable. If not, chances are good it won’t pass the appraisal process.

Some want to know about the acceptability of wells, septic tanks, and related issues. Local building codes, health regulations, or other applicable guidance will likely apply to your transaction depending on circumstances.

FHA Appraisals Are Not Free

You will need to add the appraisal to your budget during the planning and saving stages of your home loan journey. You can get a rough idea of how much to set aside by asking a lender or real estate agent in your housing market what to expect.

FHA Appraisals May Require Corrections

If you need corrections as the result of an appraisal, you will have to pay for an additional compliance inspection in typical cases. Anticipate this expense when saving for your mortgage. You may not need it in the long run, but having the money set aside will be helpful in any case.

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