Inland Empire Appraisal Blog

When you apply for an FHA mortgage to purchase or refinance your home, the appraisal that is completed as part of that transaction must be done by a state certified appraiser who is also on the FHA appraiser roster. And, the appraisal must follow specific guidelines that are detailed in HUD Handbook 4000.1. The appraisal guidelines are referred to as Minimum Property Requirements (MPR) for existing homes, or Minimum Property Standards (MPS) for new or proposed construction. If your lender has ordered an FHA appraisal for your mortgage application, it might help to know what to expect.

FHA appraisals are very much like appraisals completed for conventional financing. The appraiser will use the same methods to analyze the subject property, the neighborhood, market conditions, and other factors that impact its value. The main difference with an FHA appraisal is that it must meet those MPR or MPS guidelines, or the lender will require repairs before they close the loan. The only exception to this rule is that a lender may allow what is called an "escrow holdback" in some cases. For instance, if the home requires exterior paint repair but it is winter, so it is too cold to paint. If utilized, the escrow holdback means that money is set aside from the loan proceeds to cover required repairs when circumstances allow, like when it's warm enough to apply paint.

Paint is actually one of the big MPR issues that tends to come up, as this is a main difference between FHA and conventional financing. FHA requires that any defective exterior paint surface on any of the improvements be corrected. This includes sheds, fences, patio covers... anything that has defective paint. Defective paint includes cracking, peeling, bubbling, chipping or absence of paint that exposes wood to the elements. If the home is built in 1978 or earlier, this is especially important because much of the paint used before then is lead-based, which poses a risk to the health and safety of the home's occupants. In fact, homes built in 1978 or earlier have an additional requirement that any interior defective paint must also be repaired, and all paint chips removed from the site and properly disposed of.

FHA also requires that all appliances and mechanical systems be functional, windows that are designed to open are operational, and light and plumbing fixtures all work. The FHA appraiser must test these items, and require repair if any defects are found. This is a bit funny sometimes. For example, FHA doesn't require a home to have a dishwasher, but if one is installed, they require that it works. Sometimes it makes more sense just to remove a component that doesn't work to avoid issues. The same goes for air conditioners. The home doesn't need one, but if it has one, it needs to work. This can cause a bit of frustration with homeowners as it seems counter-intuitive, but a little planning can often avoid a headache.

One other important requirement for FHA appraisals is the need to complete a "head-and-shoulders" inspection of the attic and crawl spaces, if any. Conventional appraisals don't require this added step, but FHA requires a photo in the report to demonstrate that the appraiser at least looked into those spaces to check if there are any obvious issues.

It is very important to keep in mind that the appraiser is not a home inspector, and is only expected to identify fairly obvious issues. Many times, an apparent issue will lead the appraiser to require an inspection by a qualified, licensed professional who has the training to make a determination about anything that looks questionable. For example, an appraiser might notice that a roof looks to be near the end of its physical life, but is not qualified to make that determination, so will require a roof inspection by the appropriate professional.

These are a few of the major considerations to be aware of when it comes to an FHA appraisal. Keep these things in mind and you are likely to have a better experience and fewer hang-ups when you need an appraisal for an FHA mortgage.

You can find more information about getting an FHA mortgage at https://www.hud.gov/buying/loans