Do FHA Loans Require a Complete Home Inspection, or Just an Appraisal?

Judging by the emails we get from our readers, there appears to be some confusion about home inspections and FHA loans. One of the most common question we receive is this: Do FHA loans require a complete home inspection, or just an appraisal?

Today, I’ll do my best to answer this question, and to clear up some of the confusion that stems from it.

The short answer: The Department of Housing and Urban Development (HUD), which manages this program, does not require home inspections for FHA-insured home loans. But they do require a property appraisal to be conducted. And during the appraisal, the appraiser will inspect the property to make sure it meets HUD’s minimum property guidelines. So while an appraisal is required, a comprehensive home inspection is not.

FHA Does Not Require a Home Inspection

To reiterate, FHA loans do not require a traditional home inspection. But HUD strongly encourage buyers to have one done. In fact, they require mortgage lenders to provide a disclosure that states the importance of having a proper home inspection conducted.

The Single-Family Housing Policy Handbook (a.k.a., HUD Handbook 4000.1) states the following: “Mortgagees [i.e., mortgage lenders] are required to provide form HUD-92564-CN, ‘For Your Protection: Get a Home Inspection,’ to prospective homebuyers at first contact, be it for pre-qualification, pre-approval, or initial application.”

The document mentioned in this quote explains the importance of having a home inspection, and encourages buyers to have one. It also says that it’s the buyer’s responsibility to arrange it. “FHA does not perform a home inspection,” the handbook states.

But They Do Require a Property Appraisal

If you’re planning to use an FHA loan to buy a house, the home will have to be appraised by a licensed appraiser.

Here’s how the aforementioned HUD handbook describes this process:

“Appraiser refers to an FHA Roster Appraiser who observes, analyzes, and reports the physical and economic characteristics of a Property and provides an opinion of value to FHA. An Appraiser’s observation is limited to readily observable conditions and is not as comprehensive an inspection as one performed by a licensed home inspector.”

So, in essence, the appraiser is required to do two things:

  1. He must analyze the physical characteristics of the property, to ensure the house meets HUD’s guidelines for safety and habitability.
  2. The appraiser must also give an opinion on the home’s current market value.

But, as the handbook states, he is not required to perform a comprehensive home inspection during this process. That is typically performed separately, by a licensed inspector (and is optional).

Related: 6 basic guidelines for FHA appraisals

So there’s you answer. While HUD does not specifically require a full and independent home inspection for FHA borrowers, they do require the HUD-certified appraiser to inspect the premises for safety and habitability issues. If such issues are identified, they must be corrected. If they cannot be corrected, the loan might be denied.

Bottom Line: It’s Wise to Have It Inspected

It would be wise to have a home inspected before buying it, even if it’s not required as part of your loan program. After all, a house is a major investment. You want to know the true condition of the property — and the extent of any repairs that might be needed — before you buy it. (Here’s what home inspectors look at, if you’re curious.)

And when you consider that a home inspection usually only costs a few hundred dollars, you have even more reason to have one performed. That’s a small price to pay for the peace of mind you get.

Where to Learn More
This article answers the question, Do FHA loans require a home inspection? Our website offers one of the largest libraries of FHA information that you’ll find anywhere. If you’d like to learn more about this popular loan program, check out the main topic page. If you have specific questions about the program, you can speak to a HUD-approved mortgage lender or send an email to answers@hud.gov.