October 16, 2019

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Reader Questions About FHA Loan Appraisals: When Do They Expire?

106A reader asks, “How long do FHA Appraisals stay with the property in Georgia?”

A search of the FHA official site at www.FHA.gov reveals a Frequently Asked Questions page that answers this query, but know that this FHA loan rule applies to all FHA loan appraisals, not just those that are completed in the state of Georgia.

According to the FHA FAQ page titled, “Do FHA Appraisals Expire?” we learn the following:

“The FHA appraisal validity period is 120 days for existing, proposed or under construction properties. If the Homeownership Center (HOC) determines that soft market conditions exist in certain areas or markets, it may shorten the term of appraisals for substantial rehabilitation upon advance notice to lenders.”

When does the 120 day period an FHA appraisals begin? According to the FAQ,  “The term of the appraisal begins on the day the home is inspected by the FHA appraiser and this date appears on the appraisal report.”

However, there may be situations where an extension can be permitted on this expiration period. The FHA FAQ page says when a sales contract is signed, or when the borrower is approved for an FHA mortgage loan before the appraisal is due to expire, “the appraisal term may be extended by the lender for 30 days to allow for loan closing. Approval occurs when the lender Direct Endorsement (DE) underwriter signs the FHA Loan Underwriting Transmittal Summary, Form HUD-92900-LT. The loan must close within 150 days (120 day validity period for original report plus 30 day extension), if the appraisal has not been updated with an Appraisal Update Report (Fannie Mae 1004D/Freddie Mac 442) as set forth in Handbook 4155.2.”

Furthermore, “If the appraisal has been updated via an Appraisal Update Report, the loan must close within 240 days (120 day validity period plus 120 day validity period for the Appraisal Update Report). The appraiser must include a Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form 71) reflecting market conditions as of the effective date of the Appraisal Update Report. ”

FHA loan rules add that the appraisal may, in such cases, only be updated ONCE, and, “may not be used by a lender who is not the intended user in the original appraisal report unless the appraiser incorporates the original report by attachment rather than by reference per Advisory Opinion 3 of the USPAP. The 30 day extension is not allowed when the appraisal is updated with an Appraisal Update Report. ”

Do you have questions about FHA home loans? Ask us in the comments section. All questions and comments are held for review prior to appearing on the site.

Joe Wallace - Staff Writer

By Joe Wallace

March 6, 2015

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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