Every home financed with an FHA-insured mortgage has to meet HUD’s minimum property standards before the loan can close. The appraiser checks the house against a list of safety, security, and soundness requirements set out in HUD Handbook 4000.1, and any failure stops the loan until the problem is fixed or handled through an approved workaround. The standards are not a home inspection and they are not a guarantee of condition. They are a floor: the property must be safe to live in, sound enough to last the life of the mortgage, and marketable enough to serve as collateral.1U.S. Department of Housing and Urban Development. Minimum Property Standards
Safety, Security, and Soundness
HUD groups every appraisal requirement under three headings. Safety covers anything that could injure or sicken occupants. Security is the property’s ability to hold its value as collateral for the full term of the loan. Soundness is the structure itself: strong enough to bear its own weight and stand up to weather, settling, and normal wear. Any single failure in any of the three can block FHA insurance.1U.S. Department of Housing and Urban Development. Minimum Property Standards
Structure, Roof, and Exterior
The foundation is examined closely. Significant cracks, signs of lateral shifting, or water seeping through foundation walls all suggest instability. The ground around the house must slope away from the foundation so water doesn’t pool against the perimeter.2U.S. Department of Housing and Urban Development. HUD Handbook 4150.2 – Valuation Analysis for Single Family One- to Four-Unit Dwellings
The roof has to keep water out and carry enough remaining life to avoid imminent replacement. HUD’s general guidance treats any component that will reach the end of its useful life within two years as deferred maintenance requiring repair. If a roof already carries three layers of shingles and needs work, all existing layers must be stripped before new roofing goes on.3U.S. Department of Housing and Urban Development. HUD Handbook 4150.2 – Valuation Analysis for Single Family One- to Four-Unit Dwellings – Section: Roof
Exterior walls must be intact, with no holes or breaches that let in moisture or pests. Below-grade bedrooms have specific egress rules: the window sill can be no higher than 44 inches from the floor, and the window must have a net clear opening of at least 24 by 36 inches so occupants can escape during a fire.2U.S. Department of Housing and Urban Development. HUD Handbook 4150.2 – Valuation Analysis for Single Family One- to Four-Unit Dwellings
Heating, Electrical, and Plumbing
Every habitable room must receive adequate heat. That does not require a vent or radiator in each room, but each room needs enough warmth from the home’s system to support healthy living. When a wood-burning stove or solar system serves as the primary heat source, the house must also have a permanently installed conventional system capable of maintaining at least 50 degrees Fahrenheit in all living areas and rooms with plumbing.4U.S. Department of Housing and Urban Development. HOC Reference Guide – Electrical and Heating
The electrical system has to support normal use without tripping breakers or overloading circuits. The appraiser looks for frayed or exposed wiring in the living space, garage, and basement, and tests a sample of switches, outlets, and light fixtures. Inadequate amperage or an undersized panel gets flagged. The appraiser is not required to open the panel or use testing equipment inside it.5U.S. Department of Housing and Urban Development. HUD Handbook 4000.1 – FHA Single Family Housing Policy Handbook – Section: Electrical System
The home must have a safe, potable water supply and a functional sewage disposal system, whether municipal or private. The water heater needs a temperature and pressure relief valve with discharge piping that safely diverts steam or hot water away from occupants. Sewage systems have to operate without backup or surface discharge.
Attic and Crawlspace
The attic must be examined whether access is through a pull-down stairway or a scuttle opening, and the appraiser must enter at least head and shoulders into the space. The homeowner is responsible for providing clear access; when there is no safe way to get in, the appraiser notes that in the report.6U.S. Department of Housing and Urban Development. HOC Reference Guide – Roofs and Attics
Crawlspaces get a visual inspection. Floor joists must sit at least 18 inches above the ground so someone can perform standard maintenance underneath. The space must be free of debris, properly ventilated (unless mechanically conditioned), and free of standing water, excessive moisture, or pest activity. Signs of structural damage, dampness, or vermin go into the report.
Lead-Based Paint, Mold, and Other Hazards
For any home built before 1978, the appraiser has to observe all interior and exterior surfaces for defective paint: paint that is cracking, scaling, chipping, peeling, or loose. That includes fences, detached garages, sheds, and other outbuildings on the property. Any defective paint surfaces must be scraped and repainted before the loan can close.7U.S. Department of Housing and Urban Development. HUD Handbook 4000.1 – FHA Single Family Housing Policy Handbook – Section: Lead-Based Paint
The appraiser is not testing the paint for lead. The rule treats all defective paint in pre-1978 homes as a potential lead hazard. Priming over peeling paint doesn’t satisfy it; the defective paint must be properly stabilized before repainting.
Visible mold or deteriorating asbestos-containing materials trigger a requirement for professional assessment and remediation before closing. The appraiser is looking for readily observable conditions, not running lab tests, but what they can see is enough to halt the process.
Power lines and airports have their own rules. If the property or its improvements appear to be within an unsafe distance of a power line or tower, the appraiser must notify the lender before completing the report. Local distribution lines may not pass directly over the dwelling, any structure, or a swimming pool, and the residential service drop line cannot pass over any pool, spa, or water feature. HUD policy also requires checking whether a property sits within 2,500 feet of a civilian airport or 15,000 feet of a military airport, with additional restrictions inside Runway Protection Zones and Clear Zones.8HUD Exchange. Airport Hazards
Access, Wells, and Septic
The home must be reachable by both pedestrians and vehicles from a public or private street, with access that lets emergency services reach the property without obstruction. Private streets and shared driveways must be protected by a permanent recorded easement or owned and maintained by a homeowners association. HUD does not require a separate road maintenance agreement, which surprises many buyers who assume one is mandatory.9U.S. Department of Housing and Urban Development. HOC Reference Guide – Private Roadways
The lot must also be free of encroachments (a neighbor’s fence or structure extending past the property line, for instance), because these interfere with clear title. Excessive noise, industrial smoke, and similar nuisances factor into the appraisal.
Rural properties with private water and sewage face extra scrutiny. HUD Handbook 4000.1 requires a minimum of 50 feet between the septic tank and any well, 75 to 100 feet between the drain field and the well, and at least 10 feet between the well and the property line. Properties that don’t meet these distances are typically ineligible unless the systems can be relocated. The appraiser may also require a water quality test.
Handrails, Pests, and Manufactured Homes
Stairways with four or more risers require a handrail. That applies to interior stairs, exterior steps, and common areas. A missing handrail on a front porch with five steps, or an interior staircase to a second floor, gets flagged.10U.S. Department of Housing and Urban Development. NSPIRE Standards – Handrail
FHA does not automatically require a termite or pest inspection. One is triggered only when the appraiser sees evidence of active infestation or decay, when state or local law requires it, when it is customary in the area, or when the lender decides to require it. Suspicious damage like hollow-sounding wood, mud tubes, or visible insect activity conditions the appraisal on a professional pest inspection before closing.11U.S. Department of Housing and Urban Development. HOC Reference Guide – Pest Control
Manufactured homes have an additional hurdle: foundation certification. A licensed professional engineer or registered architect must certify that the foundation meets HUD’s Permanent Foundations Guide for Manufactured Housing. The certification has to be site-specific, include the engineer’s or architect’s signature and seal in states that issue seals, and show their state license number. A copy goes into the lender’s loan file and the insuring binder submitted to FHA.12U.S. Department of Housing and Urban Development. HOC Reference Guide – Manufactured Homes: Foundation Compliance
Cosmetic Flaws vs. Required Repairs
Not everything the appraiser notices needs to be fixed. FHA distinguishes cosmetic issues from conditions that threaten safety, soundness, or marketability. Cosmetic problems get noted and factored into value, but they don’t block the loan. Mismatched floor tiles, holes in window screens, cracked but not broken window glass, a dripping faucet that isn’t causing damage, and peeling interior paint in homes built after 1978 fall on the cosmetic side.
The line moves once safety or structural impact enters the picture. A cracked window in an attached garage is cosmetic; a broken window in the same garage that lets moisture in and risks mold or structural damage is a required repair. Standing water against the foundation, bulging walls, unsupported floor joists, and faulty mechanical systems are all mandatory fixes.
When the appraiser encounters a condition they can’t evaluate on their own, the appraisal is completed “subject to inspection” by a qualified professional. Excessively damp basements, suspected hazardous materials, and possible pest infestations commonly trigger this. The specialist inspection adds time and cost but gives the lender confidence the underlying issue is either acceptable or repairable.
The Appraisal Is Not a Home Inspection
Buyers routinely confuse the two, and HUD is direct about it. Form HUD-92564-CN states: “Appraisals are NOT Home Inspections!” The appraisal estimates the home’s value for the lender and checks for obvious deficiencies against FHA’s minimum standards. It is not a comprehensive examination of every system in the house.13U.S. Department of Housing and Urban Development. For Your Protection: Get a Home Inspection (Form HUD-92564-CN)
The same form warns that FHA does not guarantee the condition of the home, and that if problems surface after closing, FHA will not lend money for repairs or buy the home back. A separate home inspection, paid by the buyer, is the way to catch what the appraisal was never designed to find.
What Happens When a Property Fails
When the appraiser identifies deficiencies, the report lists each required repair. The property cannot close until a follow-up inspection confirms the work is done. The appraiser or another qualified inspector uses Form HUD-92051, the Compliance Inspection Report, to verify that each repair meets FHA standards.14U.S. Department of Housing and Urban Development. Compliance Inspection Report (Form HUD-92051)
Who pays is not dictated by FHA. It is a negotiation between buyer and seller, driven by the purchase contract. In most transactions, sellers handle repairs because the contract requires the home to meet FHA standards before closing, though buyers sometimes agree to cover certain fixes to keep the deal moving. The re-inspection itself typically costs $100 to $200.
When weather, scheduling, or the nature of the work makes it impossible to finish before closing, FHA allows an escrow holdback. The lender sets aside funds in escrow at closing, and contractors complete the repairs afterward, generally within 30 days. This option requires lender approval and adds administrative oversight, but it keeps deals from collapsing over a delayed roof repair in January.
When the repair list is long or the work involves structural changes, the standard repair-and-reinspect approach may not be practical. FHA’s 203(k) loan program lets borrowers finance both the purchase price and the cost of rehabilitation in a single mortgage. The Standard 203(k) covers major renovations and structural work, and typically requires an FHA-approved consultant to develop a work plan. The Limited 203(k) handles smaller, non-structural repairs up to a capped amount. Repair funds are held in escrow and released in stages as work passes inspection.
What the Appraisal Costs
A standard FHA appraisal for a single-family home typically runs between $400 and $700, depending on the property’s location, size, and complexity. The buyer pays the appraisal fee, usually when the appraisal is ordered rather than at closing. If a re-inspection is needed, expect another $100 to $200. These costs are not refundable if the deal falls through, and the appraisal stays with the property’s FHA case number for its validity period, meaning the next FHA buyer may end up using the same appraisal rather than ordering a new one.