FHA Appraisal: Requirements, Validity, and Repair Standards

An FHA appraisal has two jobs: it sets the home’s market value for the loan, and it confirms the property meets HUD’s minimum standards for safety, security, and soundness. Every FHA-insured mortgage requires one, performed by an FHA-approved appraiser before closing, and the FHA appraisal requirements go further than a conventional valuation because HUD is willing to insure the loan only if the house itself is safe to live in.¹

The Three Standards HUD Applies

FHA appraisals follow HUD Handbook 4000.1, which organizes property condition around three ideas. Safety means the home won’t expose occupants to hazards like exposed wiring, contaminated water, or toxic paint. Security means the structure keeps out weather and unauthorized entry. Soundness means the home is structurally intact enough to remain a viable asset over the life of the mortgage.²

When a property fails on any of the three, the appraiser marks the report “subject to” specific repairs. Nothing closes until those items are corrected and verified. A crumbling foundation, missing handrails on an elevated deck, or a heating system that won’t run are typical triggers. HUD’s reasoning is straightforward: insuring a mortgage on a dangerous or failing house raises the risk of default.

An FHA Appraisal Is Not a Home Inspection

HUD is emphatic on this point. Its disclosure form HUD-92564-CN states plainly: “Appraisals are NOT Home Inspections!”³ The appraiser checks whether the house meets HUD’s minimums and estimates value. A home inspector goes deeper, evaluating condition in detail, estimating the remaining life of major systems, and calling out items that need repair.

Several problems fall outside the scope of an FHA appraisal: radon, mold, air and water quality, asbestos, and urea formaldehyde insulation.³ A home can pass its FHA appraisal and still have expensive hidden defects. Skipping a separate home inspection because the appraiser “already looked at the house” is one of the costlier mistakes buyers make.

What the Appraiser Physically Checks

Roof and Attic

The roof needs at least two years of remaining physical life. Less than that, or any sign of active leakage, gets flagged. The appraiser may require a professional roof inspection, a certification of remaining life, or replacement before the loan proceeds.⁴

The attic has to be observed. At minimum the appraiser enters head and shoulders through the access point, checking for structural damage, moisture, and insulation. The homeowner is responsible for providing clear access. Where no safe access exists, the appraiser notes the area as inaccessible and the report stalls until a way in is provided.⁴ Crawl spaces face the same scrutiny for moisture, ventilation, and pest damage.

Mechanical Systems and Utilities

All utilities must be on and working at the time of the appraisal. The HVAC system is tested for adequate heating and cooling. Electrical panels need to be free of hazards like frayed wiring and double-tapped breakers. Plumbing is checked for leaks, water pressure, and a functioning water heater with a pressure relief valve. A house with the water shut off or a furnace that won’t fire cannot get a clear appraisal.

Lead-Based Paint on Pre-1978 Homes

Homes built before 1978 draw extra attention. Federal rules require a visual assessment of all painted surfaces, and any deteriorated paint must be stabilized before the property can clear. Stabilization means scraping, priming, and repainting affected areas, with clearance testing to confirm the work was done properly.⁵ The appraiser doesn’t test paint for lead content; the trigger is simply peeling, chipping, or flaking on interior or exterior surfaces.

Wells, Shared Water Systems, and Septic Distance

Individual water wells don’t automatically require testing under current FHA guidelines. Testing kicks in only when the state or local jurisdiction mandates it, when there’s reason to believe the water may be contaminated, or when the system uses purification equipment. The lender can also require testing at its discretion.⁶

When testing is required, the water must meet the local health authority’s standards, or EPA maximum contaminant levels where no local standards exist. On new construction, minimum distances also apply: at least 50 feet between the well and a septic tank, and at least 100 feet between the well and a drain field or seepage pit. Local health authorities can require greater distances.⁶

Shared wells are more complicated. FHA allows a shared well to serve no more than four properties, and only when connecting to a public supply isn’t feasible. The well must deliver at least three gallons per minute for existing homes, or five gallons per minute for new construction, sustained over a four-hour period. A recorded shared well agreement is required, covering cost sharing for maintenance, easement access, emergency repair rights, and a prohibition on connecting additional homes without every party’s consent.² Missing or incomplete well agreements are a common deal-killer on rural properties.

Shared driveways are simpler. They need a permanent recorded easement, an ownership interest, or HOA maintenance. Unlike shared wells, no joint maintenance agreement is required.²

How Long an FHA Appraisal Stays Valid

An FHA appraisal is valid for 180 days from the effective date, which is the date the appraiser inspects the property.⁷ If the loan doesn’t close in that window, the lender can order an appraisal update rather than starting fresh. The update extends validity to one year from the original effective date.⁸ The optional 30-day extension that once existed is gone; the path past 180 days is an update, not an extension.

Switching Lenders Mid-Transaction

HUD assigns a case number that ties the appraisal to the property address, not the lender. If you change lenders during the transaction, the original lender transfers the case number and appraisal to the new lender through HUD’s FHA Connection system.⁹ You can’t walk away from an unfavorable valuation and order a new one with a different lender. The original appraisal follows the property for the rest of its validity period, and the transfer has to be initiated by the originating lender or their sponsor.

When the Appraisal Comes In Low

FHA will only insure a loan up to the appraised value. If the appraisal falls below the purchase price, the buyer either brings cash to cover the gap, renegotiates with the seller, or requests a reconsideration of value.

The reconsideration process is narrower than most buyers expect. The lender’s underwriter can request one when the appraiser didn’t consider information that was relevant on the effective date of the appraisal, providing comparable sales data or other market evidence the appraiser may have missed. The request goes through the underwriter, not directly from the buyer to the appraiser.¹⁰

Federal law protects appraiser independence throughout. Nobody involved in the transaction can pressure, coerce, or incentivize the appraiser to hit a number. The law does explicitly allow asking the appraiser to consider additional comparables, provide further explanation, or correct errors.¹¹ If the reconsideration requires additional work because the data wasn’t available on the inspection date, the appraiser may charge a fee, but the borrower isn’t responsible for that cost when the data gap wasn’t their fault.¹⁰

Required Repairs and Who Pays

When the appraiser flags deficiencies, the report is marked “subject to” specific repairs, and the property can’t close until they’re done and verified. The appraiser or a designated inspector documents the corrections using Form HUD-92051, the Compliance Inspection Report.¹² The follow-up inspection confirms the work meets professional standards and the hazard is gone. Expect a separate re-inspection fee, typically $100 to $200 depending on scope.

FHA doesn’t dictate whether buyer or seller pays for required repairs. It’s a negotiation in the purchase contract. Sellers often handle minor items without asking for credits because the cost is small. Bigger items like a roof replacement or sewer line repair carry real negotiating weight and should be addressed before the appraisal contingency deadline passes. If the seller refuses to make required repairs, the lender won’t approve the loan. Sellers sometimes contribute toward the buyer’s costs through concessions instead; FHA permits interested parties to contribute up to six percent of the sales price toward the borrower’s closing costs, prepaid items, and discount points.¹³

Escrow Holdbacks for Unfinished Work

In limited cases, FHA allows the loan to close before certain repairs are finished, with funds held in escrow. This applies mainly to weather-dependent or seasonal work. The property still has to be safe and habitable at closing. Repair costs generally cannot exceed $5,000 for a standard purchase; above that, borrowers typically look at an FHA 203(k) rehabilitation loan instead. Lenders usually require two licensed contractor bids and set a completion deadline, often 90 to 180 days after closing.

Manufactured Homes and Condominiums

Manufactured homes carry extra rules. The foundation must comply with HUD’s Permanent Foundations Guide (HUD-4930.3G), and a licensed professional engineer or registered architect has to certify compliance. The certification is site-specific and includes the professional’s signature, seal, and license number. It stays valid for future FHA loans as long as the foundation hasn’t been altered and shows no observable damage; an FHA-to-FHA refinance doesn’t need a new certification if nothing has changed.¹⁴

Condominium units require FHA project approval, and the appraisal is reported on the Individual Condominium Unit Appraisal Report form rather than the standard residential form. Manufactured homes inside condominium projects add another layer: the appraisal uses the Manufactured Home Appraisal Report form with the condominium project information as an addendum, and comparables must themselves be condominium manufactured homes, which can be hard to find in thinner markets.¹⁵

What the Appraisal Costs

FHA appraisal fees generally run $400 to $700 for a standard single-family home. Complex properties, rural locations, and high-cost markets can push the fee toward $900 or higher. FHA doesn’t set a national fee schedule; costs are market-driven and vary by region. The borrower pays upfront, and the fee is typically non-refundable whether or not the loan closes. If repairs trigger a compliance re-inspection, add another $100 to $200 on top.

1
U.S. Department of Housing and Urban Development. HUD Handbook 4150.2 – Valuation Analysis for Single Family One- to Four-Unit Dwellings
2
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
3
U.S. Department of Housing and Urban Development. For Your Protection: Get a Home Inspection (HUD-92564-CN)
4
U.S. Department of Housing and Urban Development. HOC Reference Guide – Roofs and Attics
5
eCFR. 24 CFR Part 35 – Lead-Based Paint Poisoning Prevention in Certain Residential Structures
6
U.S. Department of Housing and Urban Development. HOC Reference Guide – Individual Water Systems
7
U.S. Department of Housing and Urban Development. FHA INFO 2022-71 – FHA Implements Revised Appraisal Validity Period Guidance
8
U.S. Department of Housing and Urban Development. Updated Appraisal Validity Periods
9
U.S. Department of Housing and Urban Development. FHA Connection – Case/Appraisal Transfer
10
U.S. Department of Housing and Urban Development. Mortgagee Letter 2025-08 – Rescinding Multiple Appraisal Policy Related Mortgagee Letters
11
Office of the Law Revision Counsel. 15 USC 1639e – Appraisal Independence Requirements
12
U.S. Department of Housing and Urban Development. Compliance Inspection Report – HUD-92051
13
U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower
14
U.S. Department of Housing and Urban Development. HOC Reference Guide – Manufactured Homes: Foundation Compliance
15
U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide