A home appraisal is an essential part of buying a home and getting mortgage financing. An appraisal determines the current market value of the property and helps lenders determine if the amount of money they are lending you for the sale is appropriate. If you are applying for a Federal Housing Administration (FHA) loan, however, you will be required to get an FHA-specific appraisal conducted by a U.S. Department of Housing and Urban Development (HUD)-certified professional. What is the difference between this type of appraisal and a conventional one?
Conventional Appraisals
The purpose of a traditional appraisal is to determine the value of a property. It involves a licensed real estate appraiser examining the exterior and interior of the home and considering any upgrades or renovations performed on the house. When assessing the home, they will check the size and overall condition of the home as well as the state of the roof, foundation, and landscaping. They will also evaluate the quality of plumbing and lighting as well as the condition of any basements or attics. The appraiser will then compare the size and state of the house to others in the neighborhood to arrive at a fair market price.
Appraisals protect both the mortgage lender and the buyer as they verify the sale is price is worth the money paid, making default and loss less likely. If the appraisal comes back lower than the offered price, the lender will not approve the loan and the buyer and seller have to renegotiate the deal.
FHA Appraisals
An FHA-ordered appraisal differs from a conventional one mainly in its focus, which is safety. Because FHA loans are secured by government funds, lenders are required to take extra precaution to make sure the house is in a safe, working condition to protect against legal suits and claims. The minimum standards, as set by HUD, are stricter when it comes to FHA appraisals; everything should be functioning as it should to pass.
An FHA appraisal covers everything in a conventional one and more. It checks for pest infestations and exposed wiring. Appraisers ensure proper ventilation in crawl spaces and attics. They confirm the sanitation system and utilities work. Paint must be lead-free, and soil must be contaminant-free.
Reasons for a Failed Appraisal
FHA appraisals have stricter safety standards. Issues like mold, loose railings, faulty wiring, broken appliances, and peeling paint can raise concerns. Any problems must be fixed before closing to secure funding.
Both FHA and conventional appraisals assess a home’s value and condition. However, FHA appraisals focus more on safety. The rules are stricter, but passing is essential to get FHA loan benefits.
If you have any questions about your home’s appraisal, give us a call today. We’d love to answer your questions.
