August 15, 2017
What should I know about FHA appraisals? There are many factors to remember about the FHA appraisal process, and not all of them have to do with the act of doing the appraisal; borrowers need to know how the appraisal fits into the overall process of applying for an FHA loan and getting loan approval.
FHA Appraisals Are A Typical Expense
The appraisal fee is a standard part of a home loan’s fees and expenses, and borrowers should save money for both the appraisal and the possibility of additional fees that could be required depending on the outcome (more on that issue below).
Borrowers should keep in mind that the home loan cannot be approved without the results of the appraisal, so it’s best to come to the loan process with money set aside for the appraisal fee in advance.
FHA Appraisals Are An Expense For “Services Rendered”
Borrowers are required to pay the appraisal fee regardless of the outcome of the appraisal. What the borrower is paying for is for the act of the appraisal, not its’ outcome. It is the same when taking your car to the mechanic to see what is wrong with it-if your mechanic charges for the service of looking at the vehicle, the payment is due no matter what the outcome of that review might be.
You can’t refuse to pay the appraisal fee just because you don’t agree with the results.
Appraisals May Require Compliance Inspections
The FHA appraiser is required to note any defective conditions or other issues that may require fixing as a condition of loan approval. For example, homes built before 1978 and there is evidence of peeling paint, the appraiser would likely require that issue to be corrected because of lead paint issues.
That correction may need to be inspected prior to loan approval to insure the work was done to FHA standards and is up to code. A compliance inspection would be ordered, and the borrower is responsible for paying for this service also.
Compliance inspections are not free, but may not be as expensive as the initial appraisal (depending on the local market and other factors).
FHA Appraisals Have An Expiration Date
FHA appraisals have a standard 120-day validity date, but the lender may choose to extend that date by 30 days in some cases. This is allowed under FHA loan rules. Once an FHA appraisal has been used on a property, it may be updated at a certain point depending on circumstances.
According to HUD 4000.1, “An appraisal update must be performed before the initial appraisal, with no extension, has expired. Where the initial appraisal is subsequently updated, the updated appraisal is valid for a period of 240 Days after the effective date of the initial appraisal report that is being updated.”
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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