The FHA appraisal: value, property standards and required repairs

Job one: value

The appraiser compares the home with recent sales of similar homes nearby and reaches a value. As with any loan, the lender bases the loan amount on the lower of the price and the appraised value. A low value creates the same problem it would on a conventional loan: you renegotiate, pay the difference or use your appraisal contingency.

You have a right to see the result. The CFPB explains that for a first-lien mortgage your lender must give you a free copy of all appraisals promptly, and no later than three days before closing.

Job two: property standards

HUD's minimum property requirements are about whether a home is safe, sound and secure enough to back an insured loan. The appraiser is looking for conditions that threaten health or safety, damage the structure or affect whether the home can be lived in. Typical examples include a damaged roof, an unsafe electrical panel, a broken heating system, missing handrails or, in a home built before 1978, defective paint.

This is not a full inspection. The appraiser does not test systems or open walls. They note what they observe and call for repairs where the property falls short.

When repairs are required

If the appraiser calls for repairs, the loan cannot close until they are done, or until the lender uses an approved option for completing them after closing in limited cases. Usually the repairs are made, the appraiser or another inspector comes back to confirm the work, and then the loan moves forward.

Who pays is a matter for the contract. The handbook allows the borrower to pay for certain required repairs if the sales contract or an addendum identifies the borrower as responsible for paying for and completing them. In practice, many buyers ask the seller to make them, because the buyer does not own the house yet.

What changed in 2025

In 2024 HUD issued rules requiring FHA lenders to offer a formal borrower-initiated reconsideration of value process. In March 2025, Mortgagee Letter 2025-08 rescinded those changes and restored the earlier policy, effective immediately. If you think an FHA appraisal missed something, you can still raise it with your lender and supply information such as better comparable sales. How the lender handles it now depends on HUD's standing policy and its own procedures.

The appraisal is not an inspection

HUD makes this point in a notice FHA borrowers receive. An appraisal estimates value for the lender and does not replace a home inspection. FHA does not guarantee the value or condition of the home. If problems turn up after closing, FHA cannot pay for repairs or buy the home back. HUD also notes that the EPA and the Surgeon General recommend testing all houses for radon.

So get your own inspection. The appraiser's repair list is a minimum safety screen. The inspector's report tells you what you are actually buying.

Timing

FHA appraisals can come with repair conditions that take days or weeks. HUD's handbook allows an appraisal update when it is done within one year of the original effective date, before the loan disburses and under other conditions, but the simplest plan is to order the appraisal early. Leave room for at least one repair round before your closing date.

The bottom line

Expect the FHA appraiser to check value and basic safety. Read the report as soon as you get it, settle repairs in writing with the seller and leave time for a re-inspection. Get your own home inspection either way.