FHA Loans: What You Need to Know in 2022
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FHA Appraisal Guidelines for 2022

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While the Federal Housing Administration (FHA) offers less stringent requirements for potential homebuyers, the home itself must meet strict FHA appraisal guidelines. Like any property appraisal, an FHA appraisal certifies the home’s value and also includes a home inspection. A property must pass the inspection and meet the appraisal guidelines to qualify for an FHA loan.

How an FHA appraisal works

To get an FHA loan, homebuyers can secure their loans through FHA lenders. As part of the FHA loan application process, the mortgage lender will order a home appraisal from an FHA-approved professional appraiser.

The hired appraiser will look at the property inside and out. Their report will state the property’s value, include photos and clearly mark whether the home meets the General Acceptability Criteria, which is set by the U.S. Department of Housing and Urban Development (HUD). If the property doesn’t meet the criteria, the appraiser will advise specific repairs.

Both you and the lender will receive a copy of the FHA appraisal. The report is valid for 120 days with a possible 30-day extension. After the time period expires, you’ll need a new FHA appraisal if your loan hasn’t closed yet. It’s up to the lender to approve, conditionally approve or reject the property once they receive the FHA appraisal report. A conditional approval typically requires repairs to be made.

How does an appraisal and inspection differ?

A common point of confusion is whether a home appraisal and home inspection are required. In a conventional mortgage, home inspections are typically optional, although some lenders require them. In an FHA loan, you are not required to have both, because the FHA appraisal includes a basic inspection. The FHA suggests that a separate inspection could better inform you of the property’s condition, however.

How much does an FHA appraisal cost?

An FHA appraisal can cost between $300 and $500 dollars and can be included as part of the closing costs on a house. The exact cost of an appraisal depends on several factors, such as the property’s size and location.

FHA appraisal checklist

There are two parts to an FHA appraisal, the inspection and the market research.

In the inspection, an FHA appraiser will search for things that affect the health and safety of the occupants. These things also contribute to the longevity and the marketability of the home.

  • The physical structure of the building
    • The exterior, foundation and roof must be undamaged
    • No sign of insect infestation
    • No loose wiring or exposed electrical systems
    • Adequate ventilation of attics and crawl spaces
  • The livability of the building
    • Working utilities, including electricity, heat and clean water
    • Safe and sanitary sewage disposal
    • No lead paint
    • All fire codes and applicable safety codes are met
  • The property site
    • No soil contaminants or underground storage tanks
    • Topography drains water away from the building walls
    • Safe and reasonable property access

In the market research, an appraiser determines the stability of home prices in the area. They must cite several things including:

  • Two comparable sales that closed within 90 days of the appraisal.
  • Three recently settled sales on the appraisal grid.
  • Two active listings or pending sales on the appraisal grid.

: The FHA waived the last requirement listed above for a 12-month period between April 26, 2021, and April 26, 2022.

FHA appraisal outcomes

If your FHA appraisal comes in without a problem, congratulations! You’re closer to owning a new home. If the report reveals a few items to be fixed or comes in at a low value, you may have hit a speed bump. We go over what can happen next below.

What about making repairs after the FHA inspection?

If the appraiser marks something(s) for “further repair,” the lender can either go ahead and approve it on the condition that repairs are made or reject the property. A conditional approval is likely when any noted issues are easy to fix. But if the repairs will be difficult and/or costly, the lender may reject the property and you’ll need to look for another home to buy.

What happens if your FHA appraisal comes in low?

If the home appraises for less than your proposed mortgage amount, the FHA loan won’t be approved. If this happens you have a few options:

If you do back out because of a low appraisal, the FHA amendatory clause ensures you won’t lose money. If your heart is set on the property, you could combine tactics, such as getting the seller to reduce the price as much as possible and making up the difference with your own funds.


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