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Learn about the FHA Loan Appraisal Process

What is an FHA Loan?

An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA). The FHA is a federal government agency that was established to help make home ownership more affordable for all Americans. The FHA does not issue loans directly to borrowers, but rather insures mortgages that are issued by private lenders.

This insurance protects the lender from losses if the borrower defaults on the loan. As a result, lenders are more willing to approve FHA loans, even for borrowers with less than perfect credit. In addition, FHA loans typically have lower interest rates and down payment requirements than conventional loans. For these reasons, an FHA loan can be an excellent option for first-time home buyers or those with limited resources.

What is a FHA Loan Appraisal Process?

Appraising a property is a critical step in the FHA loan process. After all, the value of the property will ultimately determine how much money the borrower can receive from the loan. The appraisal also protects the lender by ensuring that the property is worth at least as much as the loan amount.

To complete the appraisal, the lender will hire a qualified appraiser who will visit the property and assess its value. The appraiser will take into account factors such as the location, condition of the property, and recent sale prices of similar homes in the area. The primary purpose of the appraisal is to determine the fair market value of the property. The appraiser will also look for any potential health and safety concerns, as well as any major repair or renovation needs.

The appraiser will visit the home to be purchased, and will inspect the property to ensure that it meets the FHA’s guidelines. The appraiser will also determine the value of the property, which will be used to determine the maximum loan amount that the borrower can receive. The appraisal process is important in ensuring that the borrower is not overpaying for the home, and that the home meets the minimum standards required by the FHA.

What Is The Most Common Appraisal Report for FHA Loan?

1004-URAR (Uniform Residential Appraisal Report). This report form is designed to report an appraisal of a one-unit property (aka Single Family Residence) or a one-unit property with an accessory unit; including a unit in a planned unit development (PUD), based on an interior and exterior inspection of the subject property.

What Is Included in the Appraisal Report

The 1004 URAR is a report which consists of the following sections:

Subject – This section details the subject property address, neighborhood name, occupancy type, property rights, HOA / PUD and assignment type.

Contract – This section details information regarding the sales contract such as price, date effective, and public record verification.

Neighborhood – This section details neighborhood characteristics, one-unit house trends, one-unit price/age, present land use, description and market conditions

Site – This section details zoning, dimensions, utilities, offsite improvements, encroachment, and FEMA verification

Improvements – This section details information on a general description, foundation, exterior/interior condition, garage, attic, heating, appliances, and descriptions

Comparables – This section details the cost comparison analysis which entails comparing 3 or more properties to the subject to achieve a appraisal estimate.

Reconciliation – This section details the 3 cost approach values, however only one is required, the other 2 are less used being cost and income approach.

Cost Approach – This section details the value derived from the cost approach (not required by Fannie Mae).

Income – This section details the value derived from the income approach to value (not required by Fannie Mae)

PUD Info – This section details information related to the property if it is part of a PUD (Planned Urban Development).

The 1004 URAR report may also include (but is not limited to):

Scope of Work, Intended Use, Intended User, Definition of Market Value, Statement of Assumptions and Limited Conditions, Appraiser Certifications, Supervisory Appraiser Certifications, Signatures Page, Subject Interior Photos, Sketch, Appraiser E & O, UAD Definitions, Comparable Photos, Plat Map, Appraiser License, Text Addendums, Subject Exterior Photos, Location Map, Flood Map, Market Conditions Addendum (1004MC)

What Should I Expect?

FHA Loan Appraisal Checklist 

This list is for reference only and does not guarantee compliance with FHA Minimum Property Requirements.
Minimum Property Requirements are to ensure the health and safety of the occupants and/or
the marketability of the property.

General Health and Safety

  • Foundation or structural defects
  • Whether the utilities (water, sewage, heat, and electricity) all work
  • Chipped or peeling paint in homes built before 1978
  • Incomplete renovations
  • Water damage
  • If the property is accessible to vehicles, especially emergency vehicles
  • Exposed wiring and uncovered junction boxes
  • Whether the house is too close to outside hazards, such as a leaking oil tank or a waste dump
  • Excessive noise, such as being close to an airport
  • Missing handrails


  • Leaky or defective roof and holes in the siding
  • Leaning or broken fencing
  • Doors that don’t properly open or close
  • Condition of gutters, chimney, stairs, railings, and porches
  • If swimming pools are up to code

Every Room

  • Whether each room has electricity
  • Whether each room has a window or door to the exterior to be used as a fire escape


  • Missing or broken appliances usually sold with a home, including stove and refrigerator
  • Broken or leaking sink


  • Broken or leaking toilet, sink, or tub/shower
  • No ventilation (either an exhaust fan or window)

Crawl space or basement

  • Basement moisture
  • Evidence of past or present standing water

Heating and Plumbing

  • Inoperable HVAC
  • Major plumbing issues and leaks


These are some common items an FHA appraiser looks for, but other issues that might make a house unsafe could keep it from passing. An FHA appraisal is not the same as an independent home inspection. It’s still a good idea to get a separate home inspection to make sure you’re making a wise investment!

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