How do FHA loan appraisals work?

 

An FHA appraisal is how your lender gets information to help calculate the fair market value of your home. It is different than a home inspection, which gives the borrower information needed to make an informed purchase.

Appraisals are intended to establish a home's fair market value. It also ensures that the property meets the minimum standards set by the FHA. These minimum standards do not guarantee that a property is completely free of defects. Establishing that is not the job of the FHA appraiser, nor does the appraisal constitute an approval for homes that "pass" the process. The FHA appraisal is not at indicator that the home has no problems.

An appraisal is ordered once a borrower has either selected a home to buy or decides to refinance their current property. The FHA loan will only be approved once the appraisal is complete and the lender has determined that the house is suitable for an FHA mortgage. Some loans, like the FHA streamline refinance, do not require an appraisal. The lender can use the original purchase price or a recent appraisal for this kind of loan.