What are the Appraisal Requirements for 203k Loans?

Appraisals for 203k Loans: What You Need to Know

If you want to get a 203k loan to renovate a property, you’ll need to have a licensed, HUD-approved property appraiser issue a full appraisal on the property. The most important function of the appraisal is to determine the estimated market value of the property. That information will be used so that your lender can calculate just how much they can lend you, based on the maximum 96.5% LTV limit for FHA loans.

What are the Minimum Property Standards for FHA Loans?

In addition to determining the value of the home, the appraisal will make sure that the home is in decent condition, and is generally compliant with FHA minimum property standards. However, since the FHA 203k loan includes money for repairs, borrowers may be able to purchase a home that is not compliant, as long as they plan to bring it into compliance during the renovation process. FHA minimum property standards include:

  • Decent quality home construction

  • Exterior walls must be in good condition

  • Access to clean and safe drinking water

  • Safe and and public access to the property

  • Home must have adequate drainage system

  • Availability of water, gas, sewage, and electric utilities

  • Electric wiring needs to be safely enclosed

  • Any and all crawl spaces must have natural ventilation

  • Home should be free of hazards

  • Lead-based paints must not be present

What Else Do Appraisers Look at During the FHA Appraisal Process?

In addition to making sure the home complies with HUD’s minimum safety standards, an appraiser will also look at several general aspects of the home. This is in order to determine its market value and to make sure that there are no major issues that could affect the home’s value in the foreseeable future. In general, the appraiser will examine:

  • The home’s walls and ceilings

  • The interior and exterior structure

  • Heating and cooling equipment and systems

  • Exterior landscaping

  • Appliances, plumbing, and fixtures

203k Loans Require an Additional Inspection Post-Renovation

Like other kinds of FHA loans, 203k loans only require a single appraisal, which must occur before the loan closes. However, unlike most other FHA loans, the appraiser will usually prepare two reports. The first report will detail the appraised value of the property as is, while the second report will detail the estimated value of the property once the planned repairs have taken place. And, also unlike other FHA loans, the appraiser will typically need to come back at the end of the renovation process to conduct a final inspection. This will ensure that the work has been done properly and that the results are consistent with the appraiser’s initial post-rehab value estimate.


If you’d like to learn more about FHA 203k loans, simply fill out the form below and a friendly FHA home loan specialist will get in touch!