When reviewing your closing checklist or simply trying to plan for all the expenses of your FHA home loan, the appraisal and the optional—but important—home inspection are two costs you may need to prepare for.

An FHA appraisal is required for FHA-insured financing. A home inspection is generally optional unless the purchase contract, lender, or another applicable requirement calls for one. Even when it is optional, borrowers should strongly consider an inspection before deciding whether to purchase a home.

FHA appraisal requirements are designed to help the lender determine whether the property meets FHA minimum property requirements and minimum property standards and whether it can serve as acceptable collateral for the loan. The appraisal is not a guarantee from FHA or the lender that the home is free of defects. A home inspection is a separate, more detailed evaluation, although no inspection can guarantee that every problem will be discovered.

FHA appraisal standards include requirements for basements and crawlspaces. The appraiser must report observable conditions that may affect the health and safety of the occupants, the structural soundness of the improvements, or the property’s ability to serve as collateral.

For a basement, the appraiser must notify the lender when the area is not free of dampness, wetness, or obvious structural problems that could affect occupant health and safety or the soundness of the structure.

The appraiser must also report a deficiency if a sump pump is present but is not properly functioning at the time of the appraisal. FHA guidance permits a sump pump to be hard-wired using an acceptable wiring method or to have a factory electrical cord connected to a receptacle suitable for that use.

Crawlspaces have more detailed appraisal requirements. The appraiser must visually observe all accessible areas of the crawlspace and report a deficiency when the crawlspace does not meet applicable FHA requirements, including the following:

• The floor joists must be sufficiently above ground level to allow access for maintaining and repairing ductwork and plumbing.
• When the crawlspace contains system components, there must be at least 18 inches of vertical clearance between the grade and the bottom of the floor joists.
• The crawlspace must be properly vented unless the area is mechanically conditioned.
• The crawlspace must be free of trash, debris, and vermin.
• The crawlspace must not be excessively damp or contain standing or pooling water. When moisture problems are evident, the appraiser must require an appropriate remedy, which may include a vapor barrier and/or measures to prevent water infiltration.

The appraiser must report evidence that may indicate problems with structural support, dampness, damage, or vermin when those conditions could affect the safety, security, or soundness of the property. The lender—not the appraiser—ultimately determines whether repairs, inspections, or additional documentation are required before the property is eligible for FHA-insured financing.

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