With nearly a decade covering personal finance, Rebecca Safier simplifies loans and other complex financial topics to help people manage their money with confidence. Her work has been featured in Forbes Advisor, Buy Side from WSJ, U.S. News & Wor.
Rebecca Safier Personal Finance WriterWith nearly a decade covering personal finance, Rebecca Safier simplifies loans and other complex financial topics to help people manage their money with confidence. Her work has been featured in Forbes Advisor, Buy Side from WSJ, U.S. News & Wor.
Written By Rebecca Safier Personal Finance WriterWith nearly a decade covering personal finance, Rebecca Safier simplifies loans and other complex financial topics to help people manage their money with confidence. Her work has been featured in Forbes Advisor, Buy Side from WSJ, U.S. News & Wor.
Rebecca Safier Personal Finance WriterWith nearly a decade covering personal finance, Rebecca Safier simplifies loans and other complex financial topics to help people manage their money with confidence. Her work has been featured in Forbes Advisor, Buy Side from WSJ, U.S. News & Wor.
Personal Finance Writer Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
Caroline Basile Mortgages and Student Loans Deputy EditorCaroline Basile is Forbes Advisor’s student loans and mortgages deputy editor. With experience in both the mortgage industry and as a journalist, she was previously an editor with HousingWire, where she produced daily news and feature stories. She ho.
| Mortgages and Student Loans Deputy Editor
Updated: Apr 18, 2024, 3:27am
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Insured by the Federal Housing Administration (FHA), FHA loans provide financing for home buyers who may need a higher credit score or down payment to qualify for a conventional mortgage. But while FHA loan criteria may be easier to meet, these loans come with stricter appraisal requirements.
An FHA-approved appraiser assesses the current market value of the home you’d like to buy and reviews its physical condition to ensure that it’s “safe, sound and secure.” The FHA wants to make sure that the home will not only retain its value but also that it meets safety and habitability standards.
If you’d like to buy a home with an FHA loan, you’ll need to get the home appraised by an FHA-approved appraiser first. The appraisal fulfills two purposes: first, it assesses the market value of the home, and second, it makes sure it’s safe and livable.
Conventional appraisals simply assess a home’s fair market value to assure the lender that it’s not extending too much money to the buyer. On the other hand, FHA appraisals involve a closer inspection of a home’s physical condition, such as its roof, foundation, utilities and appliances.
By ensuring the home meets its minimum property requirements, the FHA ensures that it’s not helping people buy a property that could endanger them.
Whether you’re buying an older home or a new construction, the FHA requires an appraisal to ensure the house meets its minimum property requirements and standards. The FHA appraisal timeline may span a few days or a week, involving an FHA-approved, licensed appraiser visiting the property.
This appraiser will inspect the property’s interior, exterior and surroundings and assess its value based on comparable properties and other factors. As they determine whether the house is safe, secure and sound, the appraiser will fill out the required Uniform Residential Appraisal Report.
In this report, the appraiser will provide details about the home, including the year it was built, square footage and number of rooms. They’ll also note any safety concerns or issues that don’t comply with FHA guidelines and state any needed repairs and the estimated costs to fix them.
An FHA appraiser looks over a long list of conditions when appraising a home, which are detailed in the Single-Family Housing Policy Handbook from the Department of Housing and Urban Development (HUD). Here’s an FHA appraisal checklist of some features that an appraiser will examine for signs of damage or contamination:
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While an FHA appraisal contains elements of a home inspection, it’s not as comprehensive as a home inspection by a licensed home inspector. Also, an appraisal is required for an FHA loan, whereas a home inspection is optional.
Getting a home inspected before buying it whenever possible is a good idea. A home inspector can give you more in-depth insight into the property’s condition than an appraiser can, helping you make an informed buying decision.
If the inspector finds any significant issues—and you have a home inspection contingency in your purchase offer—you may be able to negotiate with the seller to adjust the price or request repairs before finalizing the purchase. If you don’t have a home inspection contingency in place, you can still back out of the deal but will likely lose your deposit.
Like the FHA appraisal, you pay for the inspection, and you should expect it to cost a few hundred dollars. By getting an inspection as part of the home-buying process, you can have a comprehensive evaluation of the property’s condition and ensure you don’t have any substantial problems after moving in.
What happens after an FHA appraisal depends on whether the appraiser uncovers issues with the property. If there are no problems, you can close your FHA loan and purchase the property.
If there are problems, the lender may require repairs before approving the home loan. The seller may be responsible for making these repairs unless your purchase and sale agreement say otherwise.
In some cases, you may be able to go through with the home purchase if you agree to make the repairs at a later date. If you have to pay for renovations, you could consider an FHA 203(k) loan to finance both the home purchase and the cost of repairs.
Note that a lender can’t offer more money than the home’s appraised value. If the appraised value is lower than your offer, you’ll have to make up the difference or back out of the deal. If your offer didn’t contain an appraisal contingency, you could lose your deposit if you nix the deal.
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According to HomeGuide, an FHA appraisal typically costs between $400 and $900. This cost will vary by location, property size, and other factors. The home buyer is typically responsible for covering this cost.
An FHA appraisal is a required part of obtaining an FHA loan. Not only does an FHA appraisal assess the home’s fair market value, but it also makes sure the property is safe for habitation.
FHA appraisals are valid for up to 180 days. An updated appraisal is valid for 240 days to one year after the initial appraisal report.
