Property Requirements and Appraisals

An FHA appraisal is often confused with a home inspection, but they serve fundamentally different purposes. The primary goal of the FHA appraisal is to determine the market value of the property for the lender and ensure it meets the Department of Housing and Urban Development’s minimum standards for health and safety. The appraiser observes readily available conditions but does not perform a comprehensive analysis of every mechanical system. Conversely, a home inspection provides a detailed “deep dive” into the home’s condition, from roof to foundation. Buyers are strongly encouraged to hire a private home inspector for a thorough evaluation.

The FHA requires all properties to meet Minimum Property Requirements (MPR) for existing construction to ensure the home is “safe, sound, and secure.” The core objective is to protect the health and safety of the occupants and the security of the property. Key requirements include having a continuing supply of safe potable water, sanitary sewage disposal, adequate heating, and domestic hot water. The property must also have safe pedestrian and vehicular access. The appraiser must note any deficiencies that threaten the safety of the occupants or the structural integrity of the home, which must be remedied before the loan can close.

For homes built before 1978, the FHA has strict guidelines regarding lead-based paint to protect occupants, particularly children. The appraiser must inspect all interior and exterior surfaces, including fences and outbuildings, for defective paint such as cracking, scaling, chipping, or peeling. If such defects are found, they must be repaired in compliance with EPA regulations. If a child under six years of age resides or is expected to reside in the home, specific clearance examinations may be required after stabilization. While unpainted surfaces like pressure-treated wood are generally exempt, any defective paint exposing the subsurface must be repaired.

When an appraiser identifies conditions that fail to meet FHA Minimum Property Requirements, they must report the necessary repairs and provide an estimated cost to cure. If the defects compromise safety, security, or soundness—such as a leaking roof, structural damage, or electrical hazards—the appraisal will be made “subject to” these repairs. The lender will generally require these repairs to be completed before the mortgage closes. In some cases, if the repairs are minor or weather-related, funds may be set aside in an escrow account to ensure the work is finished after closing.

The FHA requires that appliances remaining with the property and contributing to its market value must be operational. While the appraiser is not required to dismantle equipment, they must observe and operate applicable mechanical systems and appliances to ensure they function properly. This includes running a cycle on the dishwasher or checking stove burners. If an appliance is present but not working, it may not necessarily cause a loan denial, but it affects the value assessment. However, essential systems like the water heater must always have a temperature and pressure-relief valve to ensure safety.

Each living unit must have a continuing supply of safe, potable water and a safe method of sewage disposal. The property must connect to a public water or sewer system if feasible and available at a reasonable cost. If public connection is not reasonable, individual systems like wells and septic tanks are acceptable provided they function properly and meet local health authority standards. For properties with wells, water quality testing is often required, particularly if the property is newly constructed or if the appraiser notices offensive odors or proximity to contamination sources like septic tanks or livestock.

An initial FHA appraisal is valid for 180 days from the effective date of the report. This validity period allows time for the loan processing and closing. If the closing is delayed beyond this window, the appraisal expires, and a new appraisal or an update is required. If the original appraisal is updated, the validity can be extended for one year from the effective date of the initial appraisal, but the update must occur before the loan disbursement date. Additionally, FHA case numbers without an appraisal logged are automatically canceled after six months.

Swimming pools on properties financed by FHA loans must comply with all local ordinances. The appraiser must inspect the pool to ensure it is operational and does not present a health or safety hazard. If the pool water contains algae but is not otherwise contaminated, cleaning may not be required, but the pool must be capable of holding water and functioning. If a pool has unstable sides or structural issues rendering it unusable, the appraisal may require it to be repaired or permanently filled in. The pool’s pump and filtration system must also be operational.

The FHA requires that a home have a heating system capable of automatically heating the living areas to a minimum of 50 degrees Fahrenheit. The system must provide healthful and comfortable heat, be safe to operate, and rely on a fuel source readily available in the geographic area. While central air conditioning is not required, if installed, it must be operational. The appraiser will check the heating system to ensure it is protected from destructive elements and has adequate capacity. Significant defects in the heating system will require repair or inspection by a qualified professional.

You can purchase a home requiring repairs using FHA financing, but the path depends on the severity of the issues. If the appraisal is marked “subject to repairs,” the seller generally must complete these repairs prior to closing for a standard FHA 203(b) loan. However, if the buyer wants to purchase a “fixer-upper” or a home with significant deficiencies, they may utilize the FHA 203(k) Rehabilitation Mortgage. This program allows the borrower to finance the purchase of the home and the cost of the necessary repairs into a single mortgage, ensuring the property meets standards after renovation.