Difference Between FHA Appraisals Versus Conventional Appraisals

If you are seeking a FHA insured mortgage loan, your mortgage lender needs to order a FHA appraisal.  The main difference between FHA appraisals versus conventional appraisals is that FHA appraisals has heavy weight on safety and security besides the value of the subject property.

Appraisal Requirement By Mortgage Lenders

Every mortgage lender will require a appraisal in the mortgage application process of mortgage loan borrower.  The main objective of a home appraisal is  to determine the value of a subject property by the mortgage lender.  The main focus of an appraisal is to determine the value of the property and it offers a sense of security for the mortgage lender lending the mortgage loan to the borrower.  There are two different types of appraisals; A FHA appraisal and a Conventional Appraisal.  There are differents between FHA appraisals versus conventional appraisals.

Conventional Loan Appraisals

Mortgage loans which are originated by banks, mortgage bankers, and credit unions are normally called conventional loans.  Conventional mortgage loan lenders will require a convetional loan appraisal and the main purpose for a conventional mortgage loan appraisal is to determine the value of the property and its condition.   One difference between FHA appraisals versus Conventional loan appraisals is that conventional loan appraisals normally do not focus on the safety and security of the subject property and normally concentrates on the value and condition of the property.

Main Difference Between FHA Appraisals Versus Conventional Loan Appraisals

The Federal Housing Administration does not make loans but insures residential mortgage loans made by private mortgage lenders as long as it meets its guidelines and rules.  Since FHA insures its mortgages on behalf of mortgage lenders FHA qualified and approved mortgage loan borrowers, it sets its own guidelines and rules pertaining to appraisals as well as other guidelines.  FHA as well as its mortgage lenders order appraisals to make sure the value of the subject property is in line with the purchase price and that the subject property is safe and secure with no hazards nor building violations.

Safety And Security Focus On FHA Insured Mortgage Appraisals

The difference between FHA appraisals versus Conventional loan appraisals is that FHA insured mortgage loan appraisals focuses on the way they view that all FHA insured mortgage loans needs homes that meets the minimum standards of standards of living.   FHA requires that the home have minimum standards of living which involve the overall safety and security of the homeowner and its occupants.  FHA requires that the home be free of peeling paint, broken windows, unsafe plumbing, HVAC, and electrical items, and have no pending building violations that can affect the safety and security of the homeowner and its occupants.   The electrical, plumbing, and HVAC systems must be in working order during the FHA appraisal and any FHA violations need to be addressed and corrected before a FHA appraiser can approve and sign off the appraisal.

FHA Appraisals Versus Conventional Loan Appraisals And The Focus On Conventional Loan Appraisals

With conventional loan appraisals,  repair items and outdated improvements to the subject property can affect the value of the home appraisal and safety and security issues may not be the cause of a mortgage loan approval unlike FHA appraisals.  FHA appraisals may have the value of the appraised property but if the appraiser deems certain items as unsafe and insecure, the property may not pass the FHA appraisal and the mortgage loan borrower may not get approved for a FHA insured mortgage loan on that particular subject property.  Fortunately, just because the property does not comply with FHA guidelines with the safety and security issues,   FHA does give the sellers a chance to correct the safety and security issues and a reinspection by the FHA appraiser is allowed.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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