Any house you buy will have to be appraised to assure the lender that it's worth the funds you are requesting. If you think you'll get a government-insured or FHA loan, you'll need an FHA appraisal. If you're getting a conventional loan, you can get by with a conventional appraisal. FHA appraisals are stricter on requiring repairs.
Appraisals Are Similar
FHA and conventional appraisals are very similar. Both look for things like peeling paint, plumbing problems, cracked foundations and other defects. You can't count on a conventional appraisal, however, to require that repairs be made before you close. If the overall appraised value, defects and all, meets your loan amount, the house passes.
It's Up to the Lender
A decision on whether to require most repairs on a conventional appraisal basically rests with your lender. An appraiser will note all problems and suggest repairs on serious issues, like structural problems, but cosmetic issues like peeling paint will be left to you as the buyer. They may reduce your appraised value, but the seller won't have to fix them.
Get Your Own Inspection
If you want to make sure everything is fixed before you close that conventional loan, you'll have to order your own inspection, which is different from an appraisal. An appraiser just looks for things that affect the overall value of the house. You need an inspector to look deeper and identify things that ought to be fixed before you close.
Some Repairs Are Required
A conventional appraisal will require repairs on things that affect your health and safety. An appraiser may suggest a structural examination, for instance, if there are foundation cracks. Your conventional appraisal will limit required repairs to items that affect the value or marketability of the house. Things that don't affect the value won't have to be fixed.
You Can Go Down, but Not Up
You can’t upgrade a conventional appraisal to an FHA appraisal. If you think you'll want an FHA loan to get lower down payment or better interest rate, you'll have to ask for an FHA appraisal. It works better downward. If you get an FHA appraisal, you'll satisfy the requirements for a conventional loan appraisal.
- FJE Appraisal Group: Differences in FHA and Conventional Appraisals
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- VA Mortgage Center.com: VA Loans - Appraisals
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