FHA Appraisal Requirements: Checklist and Guidelines Explained

Written by Kim PinnelliUpdated: 28th Dec 2021
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If you’re getting an FHA loan, you may worry about the FHA appraisal requirements, but there’s no reason to worry.

The FHA appraisal helps you and the lender know the home is worth as much as you agreed to pay (or more). If it’s worth less than you offered to pay, the appraisal helps you make important decisions.

Here’s everything you must know about the FHA appraisal requirements.

What Is an FHA Appraisal?

If you’ve applied for FHA financing, you’ll likely need an FHA appraisal. Like any other appraisal, it determines the home’s fair market value, ensuring it meets all FHA guidelines.

Remember, an FHA Mortgage is a government-backed home loan. It is great for those who qualify, but it comes with specific requirements designed to protect lives.

Basically, it shows that the home is safe, sound, and sanitary. The FHA isn’t in the business of guaranteeing loans on homes that aren’t safe for its borrowers.

How Does the FHA Appraisal Process Work?

The FHA appraisal process is the same as any other appraisal. The lender orders the appraisal with an FHA-approved appraiser.

The appraiser goes out to the home, takes measurements, counts the rooms, and takes notes about the property, including any special features or upgrades.

In the note-taking, the appraiser will make sure the home meets all FHA appraisal checklist items. The appraiser then finds comparable sales in the area to come up with the fair market value.

The appraiser will adjust the value of the subject property up or down based on better than comparable sales and worse factors.

>> More: How to Apply for a Mortgage

What Are the FHA Appraisal Requirements?

The FHA has appraisal requirements that ensure the home is livable. They won’t insure a mortgage on a property with safety hazards, isn’t livable, or isn’t large enough for the family to buy it.

The FHA makes it simple to determine if a home meets the requirements by providing an FHA appraisal checklist.

FHA Appraisal Checklist

The FHA appraisal checklist may seem ‘strict,’ but it ensures the home is livable and safe for all families. Here’s what you can expect:

  • The home must be free of any safety hazards
  • Water must safely flow away from the home
  • There must be adequate freshwater supply year-round
  • The foundation must be free of cracks or defects
  • The home must be adequately heated (at least up to 50 degrees)
  • Electricity must be available and properly installed
  • There must be a safe and working sewage system
  • The roof must be in good condition and have at least 3 years left
  • There cannot be any pest damage or terminate an infestation
  • There must be year-round access to the home from the street
  • All basement and crawl spaces must have adequate ventilation
  • All mechanical systems and utilities must be in good working order

What Does an FHA Appraiser Look At?

FHA appraisers will look at the interior and exterior of the home. They will evaluate the land, including the soil sustainability and any encroachments.

They will evaluate the physical condition of the property both inside and outside and ensure the home is livable.

The appraiser doesn’t inspect the property to the extent the inspector does, but they will make sure the home is in good condition and immediately livable.

Does the FHA Require Two Appraisals?

Many people assume the FHA requires two appraisals, but they don’t. The only loan that might require two appraisals is a jumbo loan, which isn’t an FHA loan.

Many people assume the FHA appraisal is two appraisals because it has more of an inspection vibe to it than other appraisals.

This is the FHA’s way of ensuring the home is safe, sound, and sanitary.

What Types of Homes can be FHA-Approved?

FHA-approved homes are all owner-occupied properties. They can be single-family, multi-family, townhomes, condos, and even manufactured homes (if permanently affixed), but you must live in the home full-time for it to get approved.

How Long Does an FHA Appraisal Take?

The FHA appraisal doesn’t take any longer than any other appraisal. It comes down to how long it takes the lender to order it, the appraiser to get a hold of the seller and get out there to evaluate the property.

On average, you should have an FHA appraisal back in 7 to 10 days, but it can take longer in some cases.

How Long is an FHA Appraisal Good for?

FHA appraisals are good for 120 days. This means if your sale gets delayed, you can use the same appraisal for up to 120 days.

It also means if a sale falls through for a buyer and they had an FHA appraisal on it, that appraisal remains with the property for 120 days.

If the appraisal came in low, for example, and the buyer had to back out, another buyer can’t come in and pay more for it unless they are paying cash or making up the difference between the appraised value and sales price.

FHA Appraisal vs. Home Inspection

Even though the FHA appraisal has inspection vibes to it, it’s not an inspection. Lenders don’t require that you get an inspection, but it’s always highly recommended.

It will cost you a few hundred more dollars, but you’ll get peace of mind knowing the home is in good condition, or you’ll learn what’s wrong with it.

The FHA appraisal looks at the basics, whereas an inspector digs deeper into every aspect of the home to make sure everything is in good working condition and there aren’t any major issues that could turn the investment into a money pit.

What Happens After an FHA Appraisal?

After the FHA appraisal, you may have some decisions to make. If the appraisal comes back at the value you offered to pay, and with no issues, you’re ready to move on with the sale. But, if it comes back with any issues, there’s more work to do.

Here’s what to consider.

The Appraisal Comes Back Low

If the appraisal comes back lower than you offered to pay, you have to make a decision. You typically have three options:

  • Cancel the sale: You have the right to cancel the sale if you can’t get the financing due to a low appraisal. It helps if you have a financing contingency or appraisal contingency on the contract so you can keep your earnest money if you back out.
  • Re-negotiate the price with the seller: You can ask the seller to lower the sales price to match the appraisal. Some sellers will be willing to do so since they know they can’t get the higher price unless they find a cash buyer.
  • Pay the difference between the appraised value and the amount you offered (plus your down payment): You always have the option to pay the difference between the appraised value and sales price in cash. This is in addition to your down payment and means you’re paying more for the home than it’s worth. This is only advisable in rare circumstances.

How Tough Are FHA Appraisals?

Many people assume FHA appraisals are tough, they really aren’t, though. They are the same as any other appraisal.

The goal is to find the home’s fair market value and make sure the home is safe, sound, and sanitary. While it may seem tough, it actually protects you, the buyer.

What Will Fail an FHA Appraisal?

Despite its in-depth checklist, it takes a lot to fail the FHA appraisal. If the appraiser finds anything that will affect the home’s livability or make the home unsafe, it will fail the appraisal. All other issues can be worked around, and most owners are happy to fix the issues to sell the home.

How Much Does an FHA Home Appraisal Cost?

The FHA appraisal typically costs between $300 – $500. You’re at the mercy of your lender since you have to use an FHA-approved appraiser, but the costs are the same for most appraisers in the same area.

How Long Does it Take After an Appraisal to Close on an FHA Loan?

The time it takes to close after an appraisal depends on the lender. The appraisal and title search are usually the last factors in mortgage underwriting.

Once the underwriter has the reports back, he/she can clear them and send the loan to closing. Expect another 7 – 10 days after all reports are received by the lender.

Should I Worry About an FHA Appraisal?

Don’t worry about an FHA appraisal. If anything, it protects you. Even though you want the sale to go through, there’s no sense in buying a property that’s worth less than you pay for it. The appraisal protects you and ensures you’re making a solid purchase decision.

Bottom Line: FHA Appraisal Requirements

FHA appraisal requirements may seem tougher than other appraisal requirements, but they are there to protect you and the lender.

The appraisal ensures the home you’re buying is worth at least as much as you said it’s worth and that you’re making a solid buying decision.

Kim Pinnelli
Kim Pinnelli

Kim Pinnelli is a Senior Writer, Editor, & Product Analyst with a Bachelor’s Degree in Finance from the University of Illinois at Chicago. She has been a professional financial writer for over 15 years, and has appeared in a myriad of industry leading financial media outlets. Leveraging her personal experience, Kim is committed to helping people take charge of their personal finances and make simple financial decisions.