UAD Condition Ratings: C1–C6 Scale and Mortgage Impact

UAD condition ratings are the C1 through C6 scale that appraisers use under the Uniform Appraisal Dataset to grade the physical condition of a home on the day it is appraised. Ratings from C1 to C5 let a conventional mortgage close on the property as-is. A C6 stops the loan until the deficiencies are repaired and the property earns at least a C5.¹

What Each Rating Means

C1: Brand-New Construction

C1 applies only to brand-new homes that have never been occupied. Every component, from the roof to the plumbing, must be new with zero physical wear, and the Fannie Mae UAD specification requires the dwelling to have been completed within the past 12 months.² The moment someone moves in, the home loses C1 eligibility. In practice you only see this rating on new-build closings where the buyer is the first occupant.

C2: Like-New or Fully Renovated

C2 covers properties that are nearly new or have been completely renovated to function like new construction. The Selling Guide requires no deferred maintenance, little or no physical wear, and no need for repairs.¹ The UAD specification uses a benchmark of construction or total remodeling within the past 36 months.² Gut-renovated flips fit here. A partial remodel does not: if the kitchen is new but the original 1970s plumbing remains, the appraiser will land lower on the scale.

C3: Well Maintained With Some Updates

C3 describes a home that has been well cared for and shows only minimal wear. Some components may have been updated or recently rehabilitated, but not every major system needs to have been touched.¹ Picture a 15-year-old house with a five-year-old roof, an updated kitchen, and original windows and HVAC still working properly. Original components are allowed at C3 as long as the owner addressed problems before they became serious.

C4: Adequately Maintained

Most resale homes land here. The Selling Guide describes C4 as adequate maintenance with moderate wear from normal occupancy and exposure to the elements, some updates possible, and minor deferred maintenance that is cosmetic in nature.¹ All major building components remain functional. A typical C4 home has worn carpet, a dated kitchen that still works, and a roof with a few years of life left. Nothing is broken, nothing is urgent, and the home qualifies for conventional financing without any lender-required repairs.

C5: Obvious Deferred Maintenance

At C5, condition becomes a real negotiating issue. These homes have obvious deferred maintenance and need some significant repairs. The Selling Guide notes that some building components need repair, rehabilitation, or updating, and overall livability is somewhat diminished, though the dwelling remains usable as a residence.¹ Think of a roof nearing the end of its life, an outdated electrical panel, worn flooring throughout, or plumbing fixtures that barely function. A C5 property still qualifies for conventional financing in its as-is condition, which surprises many buyers. The lender does not require repairs before closing, but the condition affects the appraised value and can make resale harder later.

C6: Safety or Structural Concerns

C6 is the bottom of the scale and carries real consequences for any transaction. The Selling Guide defines it as substantial damage or deferred maintenance with deficiencies severe enough to affect the safety, soundness, or structural integrity of the improvements.¹ The UAD specification adds that a C6 dwelling is not suitable for occupancy.² Failing foundations, major water intrusion causing structural rot, exposed or dangerous wiring, and roofs with active leaks are typical examples. These are not cosmetic problems a buyer can live with for a while.

How the Rating Gets Assigned

The appraiser gives one rating to the entire property. Even if the kitchen was redone last year but the rest of the house is worn and original, the appraiser has to synthesize everything into a single code that best reflects the property as a whole and in its entirety.¹

One rule matters more than any other: if any portion of the dwelling rates a C6, the entire property gets a C6.² A single failing component can pull an otherwise sound home to the bottom of the scale.

Ratings are made on an absolute basis, meaning the appraiser evaluates the property on its own merits rather than comparing it to other homes in the neighborhood.¹ A well-kept home in a run-down area still gets the rating its condition earns. The appraiser also weighs the actual age of the property against its observed maintenance and documents any specific upgrades or repairs that justify the rating chosen.

What the Rating Means for Your Mortgage

For conventional loans sold to Fannie Mae, C1 through C5 properties are eligible for financing in their as-is condition, and a C6 property is not. To move a C6 forward, the deficiencies have to be repaired until the property reaches at least C5. The appraisal is completed “subject to” that repair work, meaning the appraiser values the home based on its anticipated post-repair condition.¹

Once the work is done, completion has to be verified. Fannie Mae uses Form 1004D, the Appraisal Update and Completion Report, to confirm that required repairs were performed according to the original specifications.³ The 1004D follow-up inspection generally costs roughly $190 to $260 depending on the market.

For any property where the appraiser flagged deficiencies affecting safety, soundness, or structural integrity, the lender has to obtain satisfactory evidence that the condition has been corrected before delivering the loan.¹ For issues like insect damage, dampness, or settlement, the lender can either get proof the problem was fixed or accept a professional inspection report confirming that the condition poses no structural threat.

FHA Adds Its Own Overlay

FHA-insured loans go beyond the UAD rating itself. The appraiser has to determine whether any conditions threaten the continued use, security, or marketability of the property, and flag needed repairs as appraisal conditions.⁴ Peeling paint in pre-1978 homes, broken windows, missing handrails, and faulty electrical systems commonly trigger required repairs on FHA appraisals even when the property might pass at C4 or C5 under conventional rules.

VA Uses Minimum Property Requirements

VA loans use their own Minimum Property Requirements built around three standards: the home has to be safe, structurally sound, and sanitary. Appraisers verify that the roof prevents moisture intrusion, mechanical systems operate safely with adequate capacity, the home has continuous potable and hot water, and electrical service supports lighting and necessary equipment.⁵ A property that technically rates C5 can still fail VA requirements if specific items like crawl space ventilation or sewage disposal fall short.

Options If the Property Rates C6

A C6 rating does not have to kill a transaction. It just eliminates the simplest path. Two renovation programs exist for properties that cannot qualify for standard financing in their current state.

Fannie Mae’s HomeStyle Renovation mortgage lets buyers finance the purchase price and the cost of repairs in a single loan. There are no restrictions on the types of renovations allowed and no minimum dollar amount, though the program cannot fund a complete tear-down and rebuild.⁶ On a purchase, renovation costs cannot exceed 75 percent of the lesser of the purchase price plus renovation costs or the as-completed appraised value.⁷

The FHA 203(k) rehabilitation mortgage plays the same role on the FHA side. Rehabilitation cost has to be at least $5,000 and the total property value after repairs must fall within FHA loan limits for the area. A standard 203(k) handles major structural work; a limited 203(k) covers smaller projects. Either version lets a buyer purchase and renovate a distressed property with a single closing.

Challenging a Rating You Disagree With

If an appraiser assigned what you believe is the wrong condition rating, there is a formal path called a Reconsideration of Value, or ROV. Federal interagency guidance defines this as a request to the appraiser to reassess the report based on deficiencies or new information that may affect the conclusion.⁸ You submit through your lender, not directly to the appraiser.

What moves the needle is specific, verifiable information the appraiser may not have had: contractor invoices for a new roof, permits for recent electrical work, photos documenting conditions the appraiser missed or mischaracterized. The guidance encourages lenders to explain how borrowers can raise concerns early enough in underwriting for issues to be resolved before a final credit decision.⁸ If your lender does not volunteer the ROV process, ask about it directly, because a request submitted after the credit decision is far less likely to change anything.

1
Fannie Mae Selling Guide. Property Condition and Quality of Construction of the Improvements
2
Fannie Mae. Uniform Appraisal Dataset (UAD) Specification – Condition and Quality Rating Definitions
3
Fannie Mae Selling Guide. Requirements for Verifying Completion and Postponed Improvements
4
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
5
U.S. Department of Veterans Affairs. VA Basic MPR Checklist
6
Fannie Mae Selling Guide. HomeStyle Renovation Mortgages
7
Fannie Mae Selling Guide. HomeStyle Renovation Mortgages – Loan and Borrower Eligibility
8
Federal Reserve. Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations