If you’re looking to purchase a home using an FHA loan, you must pass an FHA inspection before finalizing the deal. An FHA loan, backed by the government, is popular among first-time homebuyers due to its lenient qualification criteria and low down payment requirement. In 2025, 15% of homebuyers opting for financing chose an FHA loan.
The U.S. Department of Housing and Urban Development (HUD) establishes the minimum property standards that properties must meet to qualify for an FHA loan. These standards aim to safeguard both the buyer and the investment by ensuring that the property is appropriately priced and free from issues that could jeopardize living conditions.
This is where the FHA appraisal inspection plays a crucial role. The appraiser assesses the property’s safety, structural integrity, and absence of significant health or safety risks. Although not as comprehensive as a full home inspection, the FHA appraisal inspection identifies certain issues such as roof problems, peeling paint, water damage, or faulty utilities that may need attention before closing.
Understanding the FHA inspection requirements can help you determine the suitability of a prospective home and how to proceed if repairs are flagged by the appraiser, whether you’re purchasing a property in Kansas City or Madison, WI.
What is an FHA appraisal?
An FHA appraisal differs from a conventional home appraisal as it not only evaluates the property’s value but also ensures it meets basic HUD livability standards. When your lender arranges for an FHA-approved appraiser to visit the property, they will conduct a thorough inspection and document notable features while also providing feedback on the property’s safety, security, and livability.
An FHA appraisal inspection typically incurs a higher cost than a standard appraisal due to its more detailed nature and specific requirements. On average, buyers can expect to pay between $400-$700 for an FHA appraisal, depending on factors such as property size, location, and market demand. While an FHA inspection covers certain aspects of a property, it does not replace a buyer’s home inspection, which will be discussed further in this article.
FHA loan inspection requirements
Given that FHA loans aim to make homeownership more accessible, HUD requires properties to meet specific safety and livability standards before loan approval. The inspection component of the FHA appraisal focuses on three main areas:
- Safety: Ensuring no conditions that endanger the health or safety of occupants
- Security: Protection from unauthorized entry and the elements
- Structural soundness: Expected to remain in good condition for the foreseeable future
Most FHA loan appraisal inspections will assess the following requirements:
Safety and habitability
- No exposed wiring or visibly hazardous electrical panels
- Functional smoke detectors (and CO detectors if mandated locally)
- Secure stairs with handrails, stable flooring, and minimal tripping hazards
- No active roof or foundation leaks, significant mold growth, or severe water damage
- For homes constructed before 1978: Absence of peeling or chipping paint that could pose a lead hazard
Structure and exterior
- Foundation and exterior walls free of major cracking, bowing, or shifting
- Roof without active leaks and with at least 2 years of useful life remaining
- Siding, gutters, downspouts, and grading directing water away from the property
- Windows and doors functioning properly and free of damage
Systems and utilities
- Permanently installed heating system capable of maintaining a livable temperature
- Operational plumbing with hot and cold running water, functioning drains, and no major leaks
- Safe and grounded electrical system
- Connection to public or approved water and sewer (or septic) systems; safe well systems
- If air conditioning is present, it should be operational, although not always mandatory
Interior livability
- At least one fully functional bathroom (sink, toilet, bathtub/shower)
- Working kitchen sink and plumbing; safe operation of included appliances
- No significant holes in walls, ceilings, or floors exposing wiring or framing
- Properly functioning doors and windows; safe access from driveway/sidewalk into the property
Site and access
- Year-round safe access via public or approved private road/driveway
- Appropriate site grading, drainage, and absence of major soil issues or unsafe easements
- Property suitability for residential use, free of predominant commercial use or severe environmental hazards
Multi-unit properties (2–4 units)
- All units must meet FHA safety and livability standards
- Each unit requires operational heating, plumbing, and electrical systems
- Common areas (hallways, stairs, laundry rooms) must be safe and well-illuminated
- Utilities must be properly configured and either individually metered or clearly designated
Manufactured homes
- Manufactured homes must have been built after June 15, 1976, and possess HUD certification labels
- Installation on a permanent, HUD-compliant foundation (not temporary blocks)
- Classification as real property, not personal property
- All utility connections (water, sewer/septic, electric, heat) must be permanent and operational
FHA appraisal and inspection vs. home inspection
Many FHA buyers believe they can forgo a home inspection since the FHA appraisal includes a basic safety assessment. However, the FHA appraisal is primarily a surface-level evaluation for lending purposes, merely confirming if the property meets HUD’s minimum property standards. While it may seem appealing to skip a home inspection to save time or money, both inspections complement each other effectively.
A home inspection arranged by the buyer is discretionary but provides a comprehensive understanding of the property’s condition. A licensed inspector will spend considerable time meticulously examining the home—they will test appliances and systems, inspect the roof, foundation, and plumbing, assess attics and crawlspaces, and identify any immediate or upcoming maintenance or repairs.
Depending on the findings of the inspection, you may negotiate repairs or purchase price, address issues before the FHA appraisal, or reconsider the purchase if significant concerns arise.
What happens after an FHA appraisal
Following the submission of the FHA appraiser’s report, your lender will review the documentation and provide guidance on the subsequent steps.
- If the property’s value supports your loan: If the appraisal matches or exceeds the purchase price, your loan progresses to final underwriting.
- If repairs are identified by the appraiser: Your lender issues a conditional approval outlining necessary fixes before closing, typically involving issues like peeling paint, unsafe wiring, or missing handrails.
- Determine the course of action: In most cases, sellers are responsible for addressing FHA-required repairs to ensure a successful sale.
- Verification of repairs: Once repairs are completed, the lender arranges a brief reinspection to confirm compliance with FHA standards.
- Clearance for closing: Once the lender approves the value and repairs, your loan proceeds to the final stages of closing.
What would cause a home to fail an FHA inspection?
Properties must meet FHA inspection requirements for loan approval. Some issues may impede financing but can be rectified before closing, while others could disqualify the property from FHA support, leading to the termination of the sale.
The most common issues that arise post-FHA appraisal include:
- Unwillingness of the seller to address repairs, even if minor or inexpensive
- Indications of significant underlying problems (e.g., sloping floors, moisture stains, aging mechanical systems) necessitating specialized inspections
- Unpermitted additions or renovations, especially structural alterations or garage conversions
- Marginally operational major systems (e.g., weak heating, borderline wells, roofs with limited remaining lifespan)
- Property configuration issues, such as missing HUD tags on manufactured homes or ambiguity regarding utilities in multi-unit buildings
- Concerns related to location, such as high-risk flood zones, proximity to industrial areas, or unresolved easements
FHA inspection requirements: bottom line
A property does not need to be flawless to meet FHA inspection standards. As long as the property is structurally sound, systems are functional, and there are no evident health or safety hazards, most properties can qualify for an FHA loan.
The primary obstacles in the FHA loan inspection process often stem from sellers’ reluctance to make repairs or signs indicating larger underlying issues. By understanding what the FHA appraiser looks for during the inspection, you can better navigate the process of purchasing a home with an FHA loan.