All homes purchased with an FHA-insured mortgage loan have to be appraised prior to closing. The purpose of the appraisal is to (A) determine the market value of the home and (B) ensure that it meets HUD’s minimum property requirements.
Today, we’ll address a common question on this subject. How long is an FHA appraisal good for?
Initial FHA Appraisal Usually Valid for 120 Days
Here’s the short answer: FHA appraisals typically remain valid for 120 days. But they can be extended in certain cases. If the initial home appraisal is updated, it could be valid for a total period of up to 240 days.
Let’s go to the official handbook and see what it says on this subject.
The first mention of a 120-day rule occurs in Part II, Section A-1 of HUD Handbook 4000.1 (a.k.a., the Single Family Housing Policy Handbook). In that section, we find the following requirement for FHA mortgage documents:
“Documents used in the origination and underwriting of a Mortgage may not be more than 120 Days old at the Disbursement Date.”
The disbursement date in this context is the date that the loan is actually funded. This typically takes place on or near closing day. So the general requirement for mortgage documents used on an FHA loan is that they be no more than 120 days old at the time of disbursement.
So in most cases, the initial FHA appraisal is valid / good for 120 days.
But there are cases where the mortgage lender can extend the initial appraisal. For instance, if something happens to delay the underwriting process (and that delay will push the appraisal beyond the standard 120-day age requirement), then the lender might seek an extension to allow extra processing time.
Cases Where It Can Be Extended
As the handbook states, the 120-day validity period for the FHA appraisal can be extended for 30 days if either of these conditions are met:
- The Mortgagee [i.e., lender] approved the Borrower or HUD issued the Firm Commitment before the expiration of the original appraisal.
- The Borrower signed a valid sales contract prior to the expiration date of the appraisal.
Again, this is an either / or situation. Lenders do not need to meet both of these requirements in order to extend the initial appraisal. Only one of these requirements will suffice, in most cases.
We see the 120-day rule mentioned again when the handbook discusses the process for ordering appraisals:
“The Mortgagee must order a new appraisal for each case number assignment and may not reuse an appraisal that was performed under another case number, even if the prior appraisal is not yet more than 120 Days old.”
In cases where the initial appraisal is updated by the lender, it then becomes valid “for a period of 240 days after the effective date of the initial appraisal report that is being updated,” according to official guidelines.
Other Frequently Asked Questions
Home buyers who use the FHA loan program tend to have a lot of questions about the appraisal process. We’ve answered one such question above, regarding how long the initial appraisal is good for and how it can be extended or updated.
Here are three more frequently asked questions:
Does FHA require a home inspection?
The short answer is no, inspections are not required under this mortgage program. But HUD strongly encourages home buyers to have a thorough inspection, and they provide a written notice to that effect.
What does the appraiser look at?
HUD requires the appraiser to examine the home inside and out, to ensure that it meets their minimum property standards. The appraiser will check out the roof, foundation, electrical system, heating and air, and more.
How is ‘market value’ determined?
The property appraiser will compare the home being purchased to recent and comparable sales, in order to determine its current market value. This article explains the process in more detail.
Questions? We are an independent publisher not associated with HUD or the Federal Housing Administration. If you have specific questions about FHA appraisals and how long they are good for, you may contact HUD directly at firstname.lastname@example.org, or call (800) CALL-FHA (225-5342).