Skip To Content

What is the difference in an appraisal for a conventional loan vs FHA loan?

The primary difference between FHA and conventional loan appraisals is that FHA loans REQUIRE appraiser "flagged" issues to be corrected in order for the loan to process. With Conventional loans an appraisal may be submitted as "subject to repairs".

We are referring to “flags” as any significant safety, health, or structural soundness issue that will typically need to be corrected regardless of the loan type. For conventional lending, the lender can decide if a repair must be done or if some other arrangement can be made (escrow for repairs, etc).

HUD also has more detailed inspection requirements with publicly available documentation whereas conventional lenders typically have their own private scope of work specified. The private specifications often overlap but are generally less intense in scope.

HUD required repairs are "limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants". Note that a structural problem will probably inhibit the "continued marketability" of the home.

Reference Publications - HUD Handbooks 4000.1 "Single Family Housing Policy" and 4150.2 "Valuation Analysis for Single Family One to Four Unit Dwellings" are great sources for information about FHA appraisal requirements for standard residential properties. We did not put links for these specifically because they get updated often. If you go to the “HUDClips” website and search from there for the most recent versions (just hit search and type in the handbook #). You can also search for terms and it will usually produce good relevant publication results of all types. If you want to take a deep dive on FHA appraisal requirements, this is a great place for research.

Back to All FAQs