How Long Are FHA Appraisals Good For?

An FHA loan, insured by the Federal Housing Administration, offers a pathway to homeownership for many individuals. A mandatory component of the FHA loan approval process is the property appraisal, which plays a significant role in determining the property’s eligibility. This appraisal ensures the home meets specific standards and is valued appropriately, protecting both the borrower and the lender in the transaction.

Standard Validity Period for FHA Appraisals

An FHA appraisal is valid for 180 days from the effective date of the appraisal report. This timeframe is established by the Department of Housing and Urban Development (HUD) guidelines in the HUD 4000.1 handbook. The 180-day period allows sufficient time for the loan to be processed and closed. Should the loan not close within this initial period, an appraisal update may be possible under specific conditions.

Factors That Can Affect an Appraisal’s Validity

Several circumstances can cause an FHA appraisal to become invalid before its standard 180-day expiration. Significant changes in local market conditions, such as a rapid decline in property values, can necessitate a new assessment. This ensures the property’s value accurately reflects current market trends at the time of closing.

Material damage to the property occurring after the appraisal date, such as from fire or flood, will also invalidate the existing appraisal. Changes in FHA case numbers or loan programs can sometimes require a new appraisal, even if the original report is still within its validity period.

A property’s failure to meet FHA’s Minimum Property Requirements (MPRs) or Minimum Property Standards (MPS) upon re-inspection can also affect validity. If the initial appraisal noted required repairs that are not completed satisfactorily, the property may not be deemed eligible. A lender may order a new appraisal for various reasons, superseding the original report.

Actions When an Appraisal is No Longer Valid

When an FHA appraisal has expired or is no longer considered valid, steps are necessary to move forward with the loan. An appraisal update may be possible if the original appraisal is recent but slightly past its standard validity. This involves the original appraiser confirming that no significant changes have occurred and providing a new effective date, often without a full re-inspection.

If an appraisal update is performed, the updated appraisal can be valid for up to 240 days or even a full year from the effective date of the initial appraisal report. However, a completely new FHA appraisal is required when the original appraisal is significantly old, major market shifts have taken place, or the property has undergone substantial alterations.

Obtaining a new appraisal or an update can impact the loan timeline and incur additional costs for the borrower. Appraisal fees range from $300 to $600, though they can be higher depending on property specifics. These additional steps can introduce delays, making it important for borrowers to stay in close communication with their lender.

The Specific Purpose of an FHA Appraisal

An FHA appraisal serves several objectives, providing context for its validity requirements and guidelines. One primary purpose is borrower protection, ensuring the property’s value supports the loan amount and preventing the borrower from overpaying.

The appraisal also reduces risk for lenders by verifying the collateral’s value and condition, thereby protecting the Federal Housing Administration as the insurer of the loan. An unbiased estimate of the property’s market value is provided by the FHA-approved appraiser, who acts as an independent third party.

A function of the FHA appraisal is confirming the property meets FHA’s Minimum Property Standards (MPS) and Minimum Property Requirements (MPRs). These standards relate to the property’s safety, soundness, and security, ensuring it is habitable and structurally sound. This includes checking for issues such as structural integrity, functional utilities, and the absence of health and safety hazards like exposed wiring or chipping paint.