UAD Appraisal Condition Ratings C1–C6: Meaning and Loan Impact

UAD appraisal condition ratings run from C1 to C6 and describe the physical state of a home on a standardized national scale that every conventional appraisal delivered to Fannie Mae or Freddie Mac must use. C1 is brand-new construction; C6 is a property with deficiencies serious enough to threaten safety or structural integrity. Where your home lands on that scale can decide whether a conventional loan closes as-is, closes only after repairs, or doesn’t close at all.¹

How the Rating Gets Assigned

The appraiser measures the property against a national standard, not against other houses on the block. The best-kept 1920s bungalow on a well-maintained street is still rated on its own merits.²

Only one rating applies to the whole dwelling. An appraiser can’t rate the renovated kitchen at C2 and the unfinished basement at C5 separately; the rating reflects the property as a whole.³ The one exception runs in the borrower’s disfavor: if any portion of the home has deficiencies severe enough to threaten safety or structural integrity, the whole property is rated C6 regardless of how the rest of it looks.²

C1: Brand New, Never Occupied

C1 is reserved for newly built homes that have never been lived in. Every component of the structure must be new, and the property must show zero physical depreciation.²

Two edge cases matter. A newly built home that uses recycled materials can still qualify for C1, as long as those materials have been rehabilitated to like-new condition and the foundation is entirely new. And a never-occupied home that sat vacant without maintenance can lose C1 eligibility, because neglect creates depreciation even when nobody has lived in the house.²

C2: Like New or Fully Renovated

A C2 property has no deferred maintenance, little to no physical wear, and needs no repairs. Virtually all components are new or have been recently repaired, refinished, or replaced. That covers two situations: relatively new homes that have been exceptionally well maintained, and older homes that have gone through a complete renovation bringing everything up to current standards.²

A kitchen remodel alone doesn’t get a 30-year-old house to C2. The renovation has to be thorough enough that all outdated components and finishes have been updated. If a buyer walked through without knowing the age, the condition should feel indistinguishable from new construction.²

C3: Well Maintained With Normal Wear

C3 describes a home that has been consistently well maintained and shows only limited physical wear from normal use. Some components may have been updated or replaced, but the property has not been fully renovated. The home is in its first cycle of replacing shorter-lived items like appliances, floor coverings, and HVAC equipment.²

A useful benchmark: the home’s estimated effective age is less than its actual age. A 15-year-old house that looks and functions like a 10-year-old one because the owners kept up with maintenance fits neatly into C3. No major systems are failing and nothing needs immediate attention.²

C4: Adequately Maintained With Minor Deferred Upkeep

C4 is where most established homes land. There is some minor deferred maintenance and physical wear from normal use, but the property has been adequately maintained and needs only minimal or cosmetic repairs. All major building components still function, even if some shorter-lived items are nearing the end of their useful life.²

The effective age of a C4 home is typically close to its actual age. Worn hallway carpet, a water heater approaching its replacement window, or dated but functional kitchen cabinets all read as C4. Properties at this level are eligible for conventional financing with no repair requirements.²

C5: Obvious Deferred Maintenance and Significant Repairs Needed

A C5 rating signals obvious deferred maintenance and significant repairs. Some building components require rehabilitation or replacement. The livability and usefulness of the home are diminished by its condition, but it remains functional as a residence. A roof past due for replacement, an HVAC system that struggles, or plumbing with persistent issues all point toward C5.²

Despite those problems, C5 properties remain eligible for delivery to Fannie Mae in as-is condition.² That surprises buyers and sellers who assume a low rating automatically ends conventional financing. It doesn’t, though individual lenders may impose their own overlays or require additional documentation.

C6: Safety, Soundness, or Structural Integrity Compromised

C6 is the most severe rating. It indicates substantial damage or deferred maintenance with deficiencies serious enough to threaten the safety, soundness, or structural integrity of the home. Foundation failures, compromised load-bearing walls, extensive water damage, or exposed electrical hazards all push a property into C6.²

Loans secured by C6-rated properties are not eligible for sale to Fannie Mae. The deficiencies must be repaired and the property must achieve at least a C5 rating before the loan can be delivered. In practice, the appraiser completes the report “subject to” the repairs, meaning the appraised value assumes the work has been finished.²

What Each Rating Means for Your Loan

For conventional loans sold to Fannie Mae or Freddie Mac, C1 through C5 are all eligible for delivery in as-is condition; C6 is not.² Individual lenders sometimes set stricter standards on top of that.

Government-backed loans work differently. FHA-insured loans use their own minimum property requirements focused on the health and safety of occupants, security of the property, and structural soundness rather than on the UAD condition scale. When an FHA appraiser identifies physical deficiencies or adverse conditions, the appraisal is completed “subject to” the necessary repairs, and the appraiser must list each deficiency along with an estimated cost to cure.⁴ For properties that need substantial work, an FHA 203(k) rehabilitation mortgage can wrap repair costs into the loan. The limited version allows up to $75,000 in repair costs; the standard version covers major rehabilitation when repair costs are at least $5,000 and the total property value stays within FHA loan limits for the area.⁵ VA loans also require the property to meet minimum property requirements set through the VA appraisal, but the VA does not use the C1–C6 scale as its eligibility threshold.

Condition Rating Is Not the Same as Quality Rating

Appraisers assign two separate ratings under the UAD system, and it’s easy to confuse them. Condition ratings (C1–C6) measure physical state: maintenance, wear, depreciation, and structural soundness. Quality ratings (Q1–Q6) measure something different: the caliber of materials, workmanship, architectural complexity, and design.⁶

A luxury home built with rare materials and one-of-a-kind detail could still receive a poor condition rating if the roof rotted and the plumbing failed. A basic tract home that has been meticulously maintained might earn a C2 or C3. The two scales are independent.

Challenging a Condition Rating You Think Is Wrong

If the appraiser’s condition rating looks off, you can ask your lender for a reconsideration of value, or ROV. It’s a formal request for the appraiser to reassess based on additional information that could affect the property’s value or rating.⁷ The request goes through your lender, not directly to the appraiser.

An ROV can ask the appraiser to correct factual errors in the report, consider additional comparable sales that better reflect the property’s condition, or explain the rating chosen.⁷ Federal interagency guidance directs lenders to keep standardized processes for handling ROV requests, including clear timelines and plain-language notices for borrowers.⁸

The strongest ROV requests carry specific, concrete evidence. Receipts for a recent roof replacement, contractor invoices for completed repairs, or photographs of improvements the appraiser may have missed will move the needle more than a general objection that the rating feels too low. Raise the concern early enough in underwriting that any corrections can be made before the lender’s final credit decision.

1
Fannie Mae. Appraisal Report Forms and Exhibits
2
Fannie Mae. Property Condition and Quality of Construction of the Improvements
3
Fannie Mae. Fannie Mae Selling Guide Supplement – Uniform Appraisal Dataset UAD 3.6 Policy
4
U.S. Department of Housing and Urban Development (HUD). FHA Single Family Housing Appraisal Report and Data Delivery Guide
5
U.S. Department of Housing and Urban Development (HUD). 203(k) Rehabilitation Mortgage Insurance Program Types
6
Fannie Mae. Condition and Quality Rating Definitions
7
MyCreditUnion.gov. How to Challenge a Home Appraisal
8
Federal Reserve. Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations