FHA Appraisal Basics for First-Time Home Buyers
Why the Appraisal Is a Tool for the Lender and not the Borrower
Appraisals are not intended to be a consumer tool. They are initiated by the lender and reviewed by the lender when the appraisal report is completed.
Appraisals ensure a home meets the minimum standard for safety and habitability and helps the participating FHA lender establish the fair market value of the home.
While there may be no rule against it, typically the borrower is not present during the appraisal, and in general, you can’t communicate directly with the appraiser about the finished report.
Appraisal Standards May Vary
Why? Because state and local building codes play a big part in the appraisal. The FHA loan rulebooks do not contain local standards for all housing markets. Instead, the FHA relies on what is acceptable with local building code and other regulations. That’s not to say there are no FHA standards, but localized issues such as wells, septic tanks, and related issues have FHA requirements as well as any local rules.
When a borrower asks a question about a specific appraisal issue, the answer often includes the advice to consult the local authority. FHA appraisal rules never overrule local building code.
Appraisals Are a Service
Like car repair or plumbing, appraisals are a service you pay to receive. You have to pay for this service regardless of the outcome, and the borrower does not have the right to refuse payment just because the property did not “pass” the appraisal or the valuation came in lower than expected.
Some Appraisals May Require Repairs
If an appraisal report mentions issues that require repairs or corrections, those corrections usually appear as a condition of loan approval. Such repair work may require an additional compliance inspection which will add another expense to your loan costs. It’s smart to anticipate needing a compliance inspection and saving some extra money for this just in case.
Appraisal repairs and corrections may have a required “completed by” date. You won’t be able to close the deal in typical cases until those corrections and any required inspections are completed.
What Is an FHA Loan?
Using an FHA Loan Calculator
Meeting FHA Loan Guidelines Improves Your Chances
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