FHA

FHA Appraisal Requirements: What Inspectors Flag

An FHA appraisal runs two separate tests at the same time: whether the home is worth the purchase price, and whether it meets HUD's minimum standard for safety and soundness. The second test is the one conventional buyers rarely think about, and it stalls more FHA closings than value disputes do.

Wise Capital Mortgage originates under the FHA loan program, and FHA appraisal requirements catch a lot of first-time buyers off guard partway through a transaction they thought was already settled. The appraiser isn't a home inspector and won't open walls, climb onto the roof, or test every outlet. What the appraiser will do is walk the property against HUD's published checklist and flag anything looking unsafe, unsound, or insecure. Below is the full list of what gets flagged, what happens once it does, and how long the finished report stays good.

What does an FHA appraisal check?

An FHA appraisal checks value the same way a conventional appraisal does, pulling comparable sales and arriving at an opinion of what the home is worth. It then layers on a second pass against HUD's Minimum Property Standards, screening for health, safety, and structural issues a conventional appraisal doesn't require.

HUD lays out the standard in its Single Family Housing Policy Handbook 4000.1: a property has to be safe, sound, and secure to support FHA financing. Safe means no immediate threat to the occupants' health. Sound means the structure and major systems work as intended. Secure means the property protects against trespassing and the elements. The appraiser rates the home against those three standards on a walkthrough, not a technical inspection, which is why a buyer still benefits from paying for a separate, more thorough home inspection on top of the appraisal.

This dual role surprises people used to shopping with conventional financing, where the appraisal exists only to confirm value. On an FHA file, a home priced correctly still fails to close if the appraiser flags a safety item the seller won't fix.

What specific items get flagged on an FHA appraisal?

Roofing, electrical systems, heating, peeling paint on homes built before 1978, and missing handrails account for most of the repair items FHA appraisers cite. Each one ties back to a specific safety or structural concern rather than cosmetic condition.

The roof needs enough remaining useful life to protect the structure, and an appraiser citing visible leaks, missing shingles, or multiple roofing layers beyond code is common on older Austin-area housing stock. Electrical panels need to operate without exposed wiring, missing breakers, or obvious fire risk. Plumbing has to run water and drain properly, with no active leaks under sinks or around fixtures. Heating has to maintain a safe temperature in every room the home was built to live in, not only the main living area.

A crawlspace or attic with excess moisture, inadequate ventilation, or signs of past water intrusion gets flagged too, along with a well or septic system unable to demonstrate it functions on its own, a detail mattering more on acreage properties outside Austin's core than inside the city.

Lead paint protocol applies specifically to homes built before 1978: peeling or chipping paint on interior or exterior surfaces gets flagged and needs to be stabilized, scraped, and repainted following HUD's lead-safe procedures. Stairways with three or more steps need secure handrails. Water heaters need proper venting and, depending on the jurisdiction, strapping or bracing. Standing water around the foundation, a crawlspace with excess moisture, and a missing or disconnected sewer or septic connection all get noted as well.

Texas adds one wrinkle worth knowing about directly: FHA lenders in this state frequently require a Texas Official Wood Destroying Insect Report when the appraiser notes evidence of termite activity or wood damage, separate from the HUD checklist itself. Swimming pools come with their own sub-list, covering functioning equipment, exposed wiring near the water, and fencing meeting local code.

None of this amounts to a full home inspection. An appraiser isn't testing every GFCI outlet or running the HVAC through a full cycle. The goal is narrower: catch anything likely to make the home unsafe or unsound to live in, then leave the rest to a licensed inspector.

What happens after an FHA appraisal flags a repair?

A flagged item has to get resolved before the loan closes, either through a repair completed by the seller or, less commonly, through funds held in escrow for work finished shortly after closing. The specific path depends on the lender, the severity of the item, and what the purchase contract already says about repairs.

Most contracts negotiated in a seller's favor still leave room for FHA-required repairs, since the loan doesn't close without them. The seller typically completes the work, the appraiser (or sometimes a secondary inspector) returns for a compliance re-inspection, and the lender clears the condition before funding. This re-inspection usually carries its own trip fee, generally in the range of $75 to $150, on top of the original appraisal cost.

A home carrying more damage than a quick repair covers, structural issues, a failed roof, or extensive deferred maintenance, often doesn't fit a standard FHA purchase at all. This is the exact situation the FHA 203(k) renovation loan was built for: one loan combining the purchase price and the repair cost, based on the home's value once the work is done rather than its condition at closing. Manufactured homes carry an extra layer of appraisal scrutiny around foundation certification and HUD data plates, covered in more depth in the FHA guide for manufactured homes in Texas.

Buyers have the option to walk from a deal over unresolved appraisal repairs the same way they would over a failed inspection, assuming the purchase contract preserves this option. Nothing about the FHA process forces a buyer to accept a home the seller won't bring up to standard.

How long does an FHA appraisal stay valid, and what if the value comes in low?

An FHA appraisal is tied to the property's FHA case number and stays valid for 180 days from its effective date, with a lender able to extend it further through an appraisal update rather than ordering a brand-new report. This window matters most when a purchase contract drags past the original closing date or financing falls through and gets restarted with a new lender.

If the appraised value lands below the purchase price, the loan amount gets recalculated against the lower number, which usually means a bigger down payment to close the gap or a renegotiated price with the seller. A borrower who believes the appraisal undervalued the property has the option to request a Reconsideration of Value, submitting additional comparable sales or pointing out factual errors in the report for the appraiser or a second appraiser to review. None of this is guaranteed to change the outcome, and it adds time to a file already on a deadline.

Running the numbers on what a lower appraised value does to a monthly payment, rather than guessing, is worth doing early with the mortgage calculator before a renegotiation conversation with the seller.

In a competitive Austin market where offers routinely exceed list price, a widening gap between the contract price and the appraised value lands on the buyer unless the contract includes an appraisal gap clause splitting or absorbing the difference. Builders and agents sometimes propose these clauses upfront. A buyer financing with an FHA loan needs to understand the math behind one before signing it, since the extra cash still has to clear the lender's source-of-funds documentation the same as any other down payment dollar.

Who picks the FHA appraiser?

No. Appraiser independence rules require the lender to order the appraisal through a rotation or an appraisal management company, with no input from the buyer, seller, loan officer, or real estate agent on which appraiser gets the assignment. The rule exists specifically to keep value opinions free of pressure from anyone with a financial stake in the sale closing.

A buyer or seller disagreeing with the finished report doesn't get to request a different appraiser for a second opinion. The available remedy is the Reconsideration of Value process described above, which works within the original appraisal rather than replacing it outright.

How much does an FHA appraisal cost, and who pays for it?

FHA appraisal fees generally run in the $400 to $700 range depending on the market, the size of the property, and how complex the assignment is. The buyer typically pays this fee upfront when the appraisal gets ordered, and it counts toward total closing costs the lender discloses on the loan estimate.

The fee itself has nothing to do with whether the loan closes. A buyer pays for the appraisal regardless of what it finds, which is part of why reviewing a property carefully before writing an offer, and addressing anything obvious ahead of the appraisal, saves both time and money compared to discovering a flagged item midway through underwriting.

A seller listing an older home worth marketing to FHA buyers specifically benefits from walking the property against this checklist before it ever goes live, since fixing a loose handrail or a flaking porch rail ahead of time costs far less than losing a buyer's financing weeks into a contract. Agents working regularly with FHA buyers tend to flag these items during a listing walkthrough precisely because they've watched deals stall over repairs a seller would otherwise have handled for a few hundred dollars.

Questions about FHA eligibility, case numbers, or how an appraisal fits into a specific purchase timeline are worth routing to a loan officer directly rather than guessing from a checklist. More on how Wise Capital Mortgage approaches FHA files is on the about page.

Frequently asked questions

Does an FHA appraisal replace a home inspection? No. The appraisal checks value and screens for HUD's safety and soundness standard, while a home inspection goes deeper into the condition of individual systems and components. Most buyers benefit from ordering both.

Who schedules the FHA appraisal? The lender orders it once the purchase contract is signed and the FHA case number is assigned, using an appraiser selected through an independent rotation rather than a recommendation from the buyer, seller, or agent.

Does a refinance need a new FHA appraisal? A standard FHA rate-and-term or cash-out refinance does, but an FHA streamline refinance typically skips the appraisal entirely, relying instead on the existing loan balance and payment history.

What if the seller refuses to make an FHA-required repair? The loan doesn't close until the flagged item is resolved. If the seller won't complete the repair, the buyer's options are renegotiating the price, covering the repair cost directly where the contract allows it, or walking away from the contract.

Does a new home still need an FHA appraisal? Yes. New construction gets the same safety and soundness review as an existing home, along with additional documentation around builder certifications and, on some files, a final inspection once construction is complete.

Is an FHA appraisal transferable to a new lender? Generally yes, within the same FHA case number, since the appraisal is tied to the property rather than the originating lender. Switching lenders mid-transaction is worth confirming directly, since timing and case number transfer rules vary by situation.

Related Reading

Educational content, not a commitment to lend or an offer of credit. Program parameters vary by lender and change over time. Figures are illustrative and current as of the article’s publish date; confirm current terms before relying on them.