Note: This page was updated in November of 2023 to include the latest information on FHA appraisal guidelines and requirements for 2024.
If you use an FHA-insured home loan to buy a house, the property you purchase will have to be appraised by a HUD-approved home appraiser. The FHA appraisal process serves two purposes.
- It determines the current market value of the house, based on recent sales in the area.
- It determines whether or not the home meets HUD's minimum property standards.
Below, you will find an overview of FHA appraisal requirements and guidelines for 2024, based on current policy handbooks and other official guidance.
What Is a Home Appraisal?
A home appraisal is an expert assessment of a residential property designed to determine its current value. Whenever a mortgage loan is used to buy a house, the bank or lender will have the home appraised to find out how much it's worth based on current market conditions.
They do this mainly to protect their investment. In a typical home-buying scenario, the lender invests a lot more money than the borrower does. This is especially true for FHA loans, where the borrower can put down as little as 3.5% of the purchase price.
All types of mortgage loans require an appraisal. That includes FHA, VA and conventional financing. But in all cases, the overall goal is the same. The lender wants to make sure they're not lending more than the home is actually worth.
To determine market value, a licensed appraiser will review similar homes that have sold recently in the same area as the subject property. These are commonly referred to as comparable sales or "comps." The appraiser might also visit the home being purchased, to evaluate the property inside and out.
After this thorough investigation, the appraiser will write a report to detail his or her findings. This report will include an estimated value of the home. The report will then be sent to the mortgage lender for review and further action.
Note: The steps outlined above apply to all types of home loans, including FHA and conventional or "regular" mortgage products. But the FHA appraisal guidelines and requirements for 2024 require an additional step that's not performed with regular mortgage loans.
So let's talk about those differences next.
How the FHA Process Differs from Conventional
Here's something that tends to confuse a lot of home buyers and borrowers. In addition to focusing on the market value, FHA appraisal guidelines also provide detailed instructions for inspecting the property's overall condition.
The HUD-approved property appraiser must examine many aspects of the home being purchased, to make sure there's nothing that might endanger the health and safety of the new occupant.
"Health and safety."
This phrase is used repeatedly within the official FHA appraisal requirements for 2024, and it underscores the overall purpose for the appraisal. This process is designed to ensure that the home being purchased with an FHA loan is both safe and habitable, without any dangers to the occupant.
This is a key difference from conventional mortgage financing. With a conventional home loan (that's not insured by the federal government), the appraisal mainly focuses on determining the market value of the house. That is its primary purpose.
The FHA appraisal does this as well, but it also assesses the overall condition of the property with an emphasis on the items listed below. So in this regard, the appraiser performs a kind of "double duty."
Appraisal Requirements: What the FHA Appraiser Looks For
The minimum property requirements (MPRs) for an FHA loan are quite lengthy and detailed. They can be found in HUD Handbook 4000.1, where they go on for many pages.
Here's an overview of the FHA appraisal guidelines for 2024 that highlights the most important checkpoints home buyers and sellers should know about:
- Structural Safety: The property must be structurally sound and free of major defects that could compromise the integrity of the home.
- Foundation and Crawlspace: The foundation should be stable and free of cracks or other damage. The crawlspace, if present, should be well-ventilated and free of moisture or pests. The home's foundation should be serviceable for the life of the loan and "adequate to withstand all normal loads imposed."
- General Livability: The property must provide a safe and habitable living environment. This includes ensuring that the property has adequate heating, plumbing, and electrical systems.
- Exterior Condition: The exterior of the property should be in good condition, with no major damage or deterioration. This includes the roof, siding, windows and doors.
- Roof and Gutters: The roof should be in good condition with at least two years of remaining life. Gutters and downspouts should be clear of debris. The roof should be able to prevent moisture from entering the home and "provide reasonable future utility, durability and economy of maintenance." Downspouts should allow water to drain away from the structure.
- Interior Condition: The interior of the property should be in good condition, with no major damage or defects. This includes the walls, floors and ceilings.
- Heating and Cooling Systems: Central air conditioning is not required with FHA loans but, if installed, should be fully functional. The heating system should be "adequate for healthful and comfortable living" and able to heat the home to a minimum of 50 degrees Fahrenheit.
- Plumbing and Electrical Systems: The plumbing and electrical systems should be in working order and meet current safety standards. The electrical system should be "adequate to support the typical functions performed in the dwelling without disruption."
- Appliances: Major appliances, such as the stove, refrigerator, and dishwasher, should be in working order and in good condition.
- Lead-Based Paint Disclosure: If the property was built before 1978, the seller must provide a lead-based paint disclosure to the buyer.
- Bedroom Egress: For reasons of fire safety, any space labeled as a bedroom should have egress (exit) to the exterior. A bedroom window will suffice, as long as it's large enough to allow egress.
Additional Requirements for Living Units
In the context of FHA appraisal guidelines and requirements, a "living unit" is basically a house where the occupants reside (as opposed to a shed or detached garage).
According to HUD, mortgage lenders must confirm that living units contain:
- A continuing and sufficient supply of safe and potable water under adequate.
- Pressure and of appropriate quality for all household uses.
- Sanitary facilities and a safe method of sewage disposal.
- At least one bathroom, which must include, at a minimum, a water closet, lavatory, and a bathtub or shower.
- Space adequate for healthful and comfortable living conditions.
- Heating adequate for healthful and comfortable living conditions.
- Domestic hot water.
- Electricity adequate for lighting and mechanical equipment.
- Kitchen facilities adequate for the preparation and cooking of food, including (at a minimum) a sink with potable running water and a stove utility hookup.
The FHA appraisal guidelines listed above all have something in common. First and foremost, they are designed to protect the health and safety of the occupant. Additionally, they help ensure that the home will be marketable, in the event that it has to be resold due to foreclosure.
For a more detailed checklist of FHA appraisal requirements in 2024, refer to the latest version of HUD Handbook 4000.1. You'll find it on the HUD.gov website in both PDF and web formats.
Making Repairs After the Inspection
There's a common misconception that FHA appraisals are unnecessarily strict or rigid, and that any inspection "hits" will end your chances of getting a loan. But this is inaccurate.
The truth is that most of the common discrepancies identified during the appraisal process are entirely correctable. Some issues, like peeling lead-based paint, can be fixed with minimal cost and effort.
If the seller, listing agent, or some other party corrects the discrepancies, the appraiser can make a second visit to review those fixes. If the appraiser is satisfied with the repairs, the loan can still move forward—which is what everyone wants.
The "deal breakers" tend to be serious issues that cannot easily be corrected:
- One example would be a bedroom with no windows or doors, and therefore no egress in the event of a fire.
- Another example would be an older, fixer-upper type of home with a dilapidated roof and holes in the floor.
In the above examples, the appraisal discrepancies (A) create health and safety conditions for the occupant and (B) cannot be easily fixed. These are the types of issues that send FHA loans off the track.
The official FHA appraisal guidelines for 2024 state this clearly: "Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants."
Learn more: Most of the information presented above comes from HUD Handbook 4000.1, also known as the Single Family Housing Policy Handbook. You can learn more about the 2024 appraisal guidelines for FHA loans from handbook.