FHA Appraisal vs. Inspection: What’s Right for You?
Appraisers and lenders and inspectors, oh my
Highlights
FHA appraisals and home inspections cover similar home safety issues.
FHA appraisals are concerned with the home’s fair market value.
Home inspections aim to inform buyers of the home’s physical condition.
Although the terms appraisal and inspection are sometimes confused, they carry different meanings. FHA appraisals and certified home inspections cover a lot of the same territory and are often required before closing the deal on a home, but they ultimately serve different purposes. Learn more about FHA appraisals and home inspections to see how they can help you get the most from your home-buying experience.
Differences Between FHA Appraisals and Home Inspections
FHA appraisals and home inspections have some critical differences. The primary difference is that an FHA appraisal is concerned with general safety and the value of the home, and a home inspection focuses on the home’s condition. Both may be required in order to secure a mortgage or close a deal on a home, but they differ in terms of overall purpose, standards, and required credentials.
| Point of Difference | FHA Appraisal | Home Inspection |
|---|---|---|
| Purpose | Property value | Condition and repairs |
| Cost | $400 – $700 | $300 – $500 |
| Loan eligibility | Required | Optional |
| Credentials | FHA certification | Inspection license |
| Risk Protection | Deal renegotiation | Deal renegotiation |
Purpose and Scope
The primary aim of an FHA appraisal is to determine the value of a home, perform basic safety inspections, and provide the results to the appropriate lender. Home inspections are a deep dive into the home’s condition, necessary repairs, and other potential issues, but they can’t be used to assign a value to the home.
FHA Appraisal
With the appraisal in mind, lenders can ensure that your loan-to-value ratio represents a reasonable level of risk should you take on an FHA mortgage loan. An FHA appraiser considers:
Safety
Livability
Comparable homes nearby
Location and neighborhood
Fair market value
Home Inspection
Like an appraisal, home inspection reports consider the interior and exterior of a home as well as the property it’s on, but aim to evaluate the condition of the home itself rather than in the context of the neighborhood or market. Home inspectors check:
Plumbing system
Electrical system
Heating system
Home structure
Cost
Both FHA appraisers and home inspectors impose a fee for their services, but FHA appraisals tend to be on the higher side of that range. The actual appraisal or home inspection cost depends on factors such as the size of the home and property, location, acreage, loan type, and type of property, and buyers are typically responsible for either cost.
| Type | Average Cost |
|---|---|
| FHA Appraisal | $550 |
| Home Inspection | $400 |
Loan Eligibility
FHA appraisal costs are generally a required expense for obtaining an FHA mortgage loan. Lenders order appraisals at the expense of the buyer to determine whether the FHA home loan is risk-appropriate based on FHA guidelines. If the FHA appraisal uncovers any significant issues that don’t comply with the guidelines, the lender may require repairs before approving the loan.
Home inspections are generally optional, but having an inspection allows you to reduce your home-buying risk. In some cases, lenders or loan programs may require a home inspection as part of your mortgage application.
Certifications and Credentials
Although appraisers and home inspectors evaluate similar facets of a home, their differing goals mean that they have differing credentials and certifications.
FHA Appraiser
To be eligible to work as an FHA appraiser in the U.S., the Department of Housing and Urban Development requires individuals to be state-certified with credentials issued by the Appraisers Qualifications Board of the Appraisal Foundation. This organization establishes the minimum education, experience, and examination requirements for state appraisal certification.
Home Inspector
Home inspectors may follow a similar process, but they work with different agencies to verify and maintain their credentials. Depending on the state they work in, home inspectors obtain varying levels of education and are subject to different licensing requirements.
Most states maintain a minimum requirement that home inspectors must complete designated courses or programs or on-the-job training as well as a licensing exam, which is often the National Home Inspector Examination. Many home inspectors near you belong to the American Society of Home Inspectors—a national organization that upholds inspection standards.
Frequently Asked Questions
An FHA appraisal is valid for 180 days from the effective date of the report. In some cases, you can have the appraisal recertified if you make your request before the original expires so that you still may obtain an FHA loan. If approved, your appraisal update is valid for one year.
Depending on the size of the home, the appraisal itself can take several hours. After the appraiser’s visit is complete, it can take between a few days and a few weeks to get the report back. This timeline is largely dependent on the appraiser’s workload, research requirements, efficiency, and other factors.
Both conventional loans and FHA loans are types of mortgages, but they have a few key differences. Conventional loans are backed by private lenders without any government backing, and FHA loans are guaranteed by a government agency. FHA loans are designed to be easier for borrowers with low credit scores or income to qualify for.