The Truth About
FHA & VA Appraisals
What's real, what's myth, and what you actually need to know — straight from the FHA Handbook 4000.1 and VA Pamphlet 26-7. No guessing, no hearsay.
"VA and FHA Loans Are a Nightmare." Sound Familiar?
"The appraisers kill every deal." "Sellers won't even look at those offers." — You've heard it. Your clients have heard it. And it's costing qualified buyers real opportunities.
Here's the truth: FHA and VA loans get a bad reputation they don't entirely deserve. Yes, there are real appraisal requirements. But most of the horror stories come from cosmetic misunderstandings, not actual deal-killers.
This guide breaks it down from the actual guideline documents — so you can educate your clients, reassure listing agents, and close more deals with confidence.
Todd Hanley
Senior Loan Officer | NMLS #1013665
Certified Mortgage Advisor (CMA) • RICP
United Direct Lending • NMLS #1749719
Licensed in FL, TX, NJ
What's in This Guide
FHA Appraisals
Source: FHA Single Family Housing Policy Handbook 4000.1 — Last Revised 11/26/2025
What FHA Appraisals Are Actually Doing
The FHA appraiser has one job: verify that the property is Safe, Sound, and Secure. That's it. They're not there to nitpick cosmetic issues. They're not an inspector trying to find every flaw. They are serving as preliminary eyes on the ground for HUD to confirm the property qualifies as adequate collateral for a government-insured loan.
"MPR refers to general requirements that all homes insured by FHA be safe, sound, and secure."
— FHA Handbook 4000.1
✓ What FHA Actually Requires (The Real Deal-Killers)
These are the legitimate concerns that WILL require repair before closing:
1. Roof
- • Must prevent moisture from entering
- • Must have at least 2 years of remaining life
- • If can't confirm 2+ years → mandatory professional roofer inspection
2. Structural Integrity
- • Foundation must be serviceable for mortgage life
- • Bulging walls, cracked masonry, unsupported joists → inspection
- • Standing water against foundation → mandatory inspection
3. Mechanical Systems
- • Electrical, plumbing, HVAC must be functional
- • Faulty/defective systems → inspection required
- • Adequate heating, hot water, and electricity required
4. Living Unit Minimums
- • Safe, potable water under adequate pressure
- • At least one bathroom (toilet, lavatory, tub/shower)
- • Kitchen with sink + stove hookup
- • Space adequate for healthful living
5. Lead-Based Paint (Pre-1978 Homes)
- • ALL surfaces observed for cracking, peeling, chipping paint
- • If defective paint found → scrape, prime, double coat
- • Includes fences, garages, sheds, porches, railings
- • Must use EPA-certified lead-safe contractor
6. Wood Destroying Insects / Termites
- • ANY evidence of infestation (including prior treatment) → licensed pest inspection
- • Appraiser visual observation is NOT at pest specialist level
7. Environmental & Safety Hazards
- • Meth contamination → must be certified safe first
- • Hazardous materials, mold evidence → inspection required
- • Excessive dampness in attic/crawl space → inspection
8. Attic, Crawl Space & Septic
- • Must be visually observed to extent safely accessible
- • Water staining, mold smell, poor ventilation → inspect/repair
- • Septic: signs of failure or malfunction → further inspection
What FHA Does NOT Require
This is where deals get unnecessarily killed and offers get unnecessarily rejected.
"Cosmetic or minor repairs are not required, but the Appraiser must report and consider them in the overall condition when rating and valuing the Property."
— FHA Handbook 4000.1
What counts as cosmetic / NOT required:
ⓘ The rule is simple: If it doesn't threaten health, safety, soundness, or marketability — it doesn't need to be fixed. An FHA appraiser is NOT required to flag cosmetic wear and tear.
The FHA Appraisal Conditions
When an FHA appraiser writes their report, there are only 3 possible conclusions:
"As-Is"
No repairs needed — property meets MPR/MPS
"Subject to Repairs/Alterations"
Specific repairs must be completed to protect health, safety, or structural integrity
"Subject to Completion"
New construction not yet complete — per plans & specs
Important: The appraiser recommends repairs — the lender (mortgagee) makes the final determination on what's actually required. Appraisers cannot recommend inspections simply to limit their own liability. They must cite a specific reason.
VA Appraisals
Source: VA Lender Handbook, Pamphlet 26-7, Revised
What VA Appraisals Are Actually Doing
VA appraisals exist to protect the Veteran. The VA appraiser estimates market value AND flags any readily apparent repairs needed for the property to meet VA's Minimum Property Requirements. The result is a Notice of Value (NOV) — the VA equivalent of an appraisal approval.
"Appraisals are performed to protect the interests of Veterans, lenders, servicers, and VA."
— VA Pamphlet 26-7
🔑 Understanding the VA Notice of Value (NOV)
The NOV is what trips people up most. Here's how it works:
VA appraiser performs the appraisal and uploads it to WebLGY (VA's system)
A Staff Appraisal Reviewer (SAR) — employed by the lender — reviews it
The SAR issues the NOV to the Veteran with appraised value AND any conditions/repairs
"The repairs recommended on the appraisal should be reviewed and only those which are needed for the property to meet VA MPRs should be listed on the NOV."
— VA Pamphlet 26-7, Chapter 13
Translation: Not every repair the appraiser flags makes it onto the NOV. The SAR is required to filter the list down to only true MPR issues. This is a real protection for Veterans — and most sellers/agents don't know it exists.
✓ What VA Actually Requires (The Real MPR Categories)
Basic VA MPRs cover:
1. Space Requirements
Adequate space for living, sleeping, cooking, eating, and sanitary facilities. No minimum square footage — but the space must be functional.
2. Mechanical Systems
Heating, plumbing, and electrical must be safe and have reasonable future utility.
3. Water Supply & Sanitary
Safe, potable water + acceptable sewage disposal. Private wells trigger a Water/Sewage System Acceptability condition on the NOV.
4. Roofing & Structural
Roof must be in serviceable condition. No evidence of structural failure.
5. Hazards & Defective Conditions
Hazardous conditions, fuel pipelines, and high voltage electric lines near the property are evaluated per Chapters 12.06 and 12.07.
6. Termites / WDI
"Very Heavy" or "Moderate to Heavy" infestation zones require wood destroying insect inspection on the NOV. Exception: stacked condominiums unless appraiser notes an issue.
7. New Construction
Must have either a 1-year OR 10-year warranty. Post-construction inspection required. Radon gas and lead/water distribution conditions required on all new/proposed construction.
How VA Appraisal Conditions Work
"As-Is"
Property already meets all MPRs
"Subject to Repairs"
Appraiser recommends repairs needed to meet MPRs
"Subject to Completion"
Proposed construction — appraised per plans & specs
KEY VA RULE that most people don't know:
"When an appraiser observes an item that does not meet VA MPRs, the appraiser must recommend a repair, NOT an inspection."
— VA Pamphlet 26-7, Chapter 11
This is huge. VA appraisers cannot punt to an inspector to avoid taking a position. If they see it, they call it. This actually makes VA appraisals more decisive — not more difficult.
VA Reconsideration of Value (ROV)
If the appraised value comes in low, the Veteran has the right to request a Reconsideration of Value in writing through the lender to the Regional Loan Center (RLC):
Business Day VA Staff Review
Business Day Field Review (if needed)
Amended NOV if increase is appropriate
Pro tip: Sellers and agents who walk away from VA offers over "appraisal risk" often don't know that there's a formal, structured appeal process — and it actually works.
FHA vs. VA — Reality Check
| Issue | FHA | VA |
|---|---|---|
| Core Standard | Safe, Sound, Secure | Safe, Structurally Sound, Sanitary |
| Cosmetic Repairs | ❌ NOT required | ❌ NOT required |
| Peeling Paint (post-1978) | ❌ Not required | ❌ Not required |
| Peeling Paint (pre-1978) | ✅ Required — lead risk | ✅ Required |
| Roof | ✅ 2 years life minimum | ✅ Serviceable condition |
| Termites | ✅ If evidence present | ✅ Based on zone (termite map) |
| Structural Issues | ✅ Inspection required | ✅ Repair required (not inspection) |
| Water / Sewer | ✅ Potable + sanitary | ✅ Potable + testing if private |
| Low Value / ROV | Standard reconsideration | Formal 5-day VA review |
| Cosmetic Wear & Tear | ❌ Cannot require | ❌ SAR removes from NOV |
What Sellers & Agents Need to Hear
The real problem isn't the loan — it's the lack of education.
Not Required to Fix
- ✕ A dripping faucet? Not required under FHA or VA.
- ✕ A missing screen? Not required.
- ✕ Interior paint chips (post-1978)? Not required.
- ✕ A worn but functional roof with 3+ years left? Not required under FHA.
What IS Required
Basic habitability:
- ✓ Safe, potable water
- ✓ Functioning mechanical systems
- ✓ No active infestation
- ✓ No structural failure
These are things a seller should want to fix regardless of loan type.
The sellers and agents who reject FHA/VA offers are often rejecting well-qualified buyers over problems they'd have to disclose anyway — and potentially fix for any buyer's lender.
VA and FHA loans close every day. On properties that are clean, maintained, and habitable — they close without drama.
Sources
FHA Single Family Housing Policy Handbook 4000.1
Updated 2.3.26, Last Revised 11/26/2025
VA Lender Handbook, Pamphlet 26-7, Revised
Chapters 11, 12, 13 — Appraisal Requirements & MPRs
Have an FHA or VA Buyer?
Let's Close It Together.
I work with agents every day to navigate government-backed appraisals smoothly. If you have a deal — or a question — I'm a phone call away.