FHA Inspection Checklist: What Lenders Look For Before Approval

If you’re a first-time homebuyer trying to obtain an FHA mortgage approval, you’re not alone. According to the Mortgage Bankers Association (MBA), the Federal Housing Administration (FHA) has insured over 40 million home loans since its inception in 1934. In October 2024 alone, FHA loans accounted for 28.7% of new home purchase mortgage applications.

But securing an FHA loan isn’t just about meeting financial requirements. The property itself must pass a rigorous inspection. The government supports FHA loans, meaning homes must meet HUD’s Minimum Property Standards (MPS) to ensure they are safe, structurally sound, and move-in ready. 

Understanding what lenders look for during an FHA inspection can help you avoid surprises and confidently navigate the approval process. In this guide, we’ll break down the FHA inspection checklist, highlighting the key areas lenders focus on before approving your loan. Let’s get to it. 

What’s an FHA Appraisal?

Think of an FHA appraisal as a two-in-one process: part home valuation, part health check-up. Unlike a standard home appraisal, which simply determines a property’s market value, an FHA appraisal goes deeper: it ensures the home is not just worth the sale price but also safe, sound, and move-in ready according to HUD’s Minimum Property Standards (MPS).

If you’re buying with an FHA loan, this isn’t just a box to check; it’s a non-negotiable. The U.S. Department of Housing and Urban Development (HUD) requires FHA appraisals to confirm that a home meets safety, security, and structural standards. 

This means an FHA-approved appraiser will inspect key areas, including the roof, foundation, plumbing, electrical systems, heating, and overall structure. If they spot hazards, safety issues, or major defects, those problems must be fixed before the loan is approved. However, it’s not always a deal-breaker. Many issues can be resolved through required repairs, which the seller or buyer can negotiate before closing.

Here’s the catch: an FHA appraisal isn’t the same as a home inspection. While it covers basic functionality and safety, it won’t dig into every nook and cranny the way a full home inspection does. 

The appraisal is not a strict pass-fail test –instead, it flags concerns that must be addressed before final loan approval. Some issues can be fixed easily, while serious structural problems could still jeopardize the loan.

Why does this matter? Because an FHA appraisal can affect your home-buying timeline. If the house meets standards, great, you’re one step closer to closing. If it requires repairs, the seller or buyer will need to address them before the loan can move forward. Understanding these requirements upfront can help you prepare, avoid delays, and keep your FHA loan on track.

How Does an FHA Appraisal Work?

So, how exactly does an FHA appraisal work? As we stated before, unlike a conventional loan appraisal, which is mostly about home value, an FHA appraisal has a dual mission:

1. Confirm the home’s market value
2. Ensure the property meets HUD’s safety and structural standards

This process is handled by an FHA-approved appraiser, who acts as both a price evaluator and a health inspector for the home. Here’s what to expect:

Step 1: The Lender Orders the Appraisal

Once you apply for an FHA loan, your lender calls in an FHA-certified appraiser to check things out. Not just any appraiser can do this; HUD has a special list of approved professionals trained to spot issues that could affect the home’s livability and loan eligibility.

Step 2: The Appraiser Checks the Property

This is where things get real. The appraiser walks through the home, looking for safety, structural, and livability issues. They’re not doing a deep dive like a home inspector, but they will check for:

• Roof problems: Must have at least two years of life left and no major leaks.
• Foundation issues: No significant cracks, shifting, or water damage.
• Heating system: Must be able to keep living areas at 50°F or higher.
• Plumbing and water supply: Running, clean water is a must—no broken pipes or contamination risks.
• Electrical systems: No exposed wiring or outdated, hazardous setups.
• Lead-based paint: Homes built before 1978 can’t have peeling or chipping lead-based paint.
• General safety hazards: Think broken windows, missing handrails, or unsecured stairs, all must be fixed.

If everything looks good, great! If not, the appraiser will flag issues needing repairs before the loan can proceed.

Step 3: Determining the Home’s Value

Along with the condition check, the appraiser compares the home to recently sold, similar properties (comps) to determine its fair market value. If it appraises at or above the purchase price, you’re golden. But if it appraises for less, the lender won’t approve a loan above that amount –which means you’ll need to renegotiate or cover the difference yourself.

Step 4: The Report & Next Steps

After the visit, the appraiser submits an official FHA appraisal report to the lender. If the home meets FHA standards and the value checks out, you’re clear to move forward. However, if repairs are required, they must be completed before the loan is approved unless you’re using an FHA 203(k) loan, which lets you finance certain repairs as part of the mortgage.

FHA Home Inspection Checklist

Here’s a comprehensive FHA home inspection checklist to guide you through what appraisers scrutinize to ensure your future home meets the FHA’s standards.​

The Home Exterior

Foundation: No major cracks, shifting, or water damage. The house shouldn’t be sinking, leaning, or crumbling.

Roof: Must have at least two years of life left, no leaks, no missing shingles. If it looks like it belongs in a horror movie, expect repairs.

Walls & Siding: No exposed wood, large cracks, or peeling paint (especially on homes built before 1978. This is due to lead-based paint concerns).

Windows and Doors: Must open, close, and lock properly. No broken glass or major drafts.

Stairs and Handrails: Secure and up to safety standards –no loose railings or unstable steps.

Driveways and Walkways: No large cracks, potholes, or tripping hazards. FHA doesn’t want you face-planting before you even move in.

The Home Interior

Walls and Ceilings: No major cracks, moisture stains, or peeling paint (again, lead-based paint is a big NO).
Floors: No trip hazards, excessive wear, or damage that makes walking inside a risk.
Bedrooms: Must have at least one properly functioning window (for emergency exits).
Smoke and Carbon Monoxide Detectors: Required and functional. If they’re missing, expect them to be installed before closing.
Electrical Outlets and Fixtures: Everything should work. No exposed wiring, dead outlets, or flickering lights that make you feel like you’re in a horror movie.

Kitchen

Plumbing: No leaks, proper drainage, and functional faucets.
Appliances: The Stove or range must work. A working refrigerator isn’t required, but if it’s included in the sale, it has to function.
Cabinets & Countertops: No severe damage, missing parts, or unsafe conditions.
Electrical Outlets: They must be GFCI-protected if they are near a water source (for safety).
Ventilation: A Working range hood or exhaust fan to remove smoke, grease, and odors.

Bathrooms

Toilets, Sinks, and Showers: All must work adequately, flush/drain correctly, and not leak.
Water Pressure: Must be strong enough for regular use (no weak dribbles allowed).
GFCI Outlets: These are required near water sources to prevent electrical shocks.
Ventilation: An operational fan or a window (to prevent mold buildup).

Structural Integrity

Foundation and Crawl Spaces: No standing water, major cracks, or signs of past flooding.
Attic: Needs proper ventilation and no obvious roof leaks.
Basement: No signs of water intrusion, foundation movement, or significant structural concerns.
Insulation: Adequate for energy efficiency and no exposed asbestos in older homes.

Slab: Look for significant cracks that could affect structural integrity.

Utilities & Major Systems

Heating System: Must heat the home to at least 50°F in living areas.
Cooling System (if present): If the home has central A/C, it must function correctly.
Electrical Panel and Wiring: Must be safe, up to code, and have no exposed wires or overloaded circuits.
Plumbing System: No leaks, broken pipes, or outdated materials that pose a risk.
Water Heater: Must be secure, functional, and have a proper pressure relief valve.

Sewage & Drainage

Septic or Sewer System: Must be fully functional, properly connected, and not backing up into the home.

Septic Tank (if applicable): If the home has a septic system, it must be certified as working correctly, and some lenders may require a separate inspection.

Drainage & Grading: The property should be appropriately graded so that water flows away from the house. There should be no pooling near the foundation.

No Standing Water:  There should be no evidence of septic failures, sewer leaks, or water accumulating around the home.

Safety and Environmental Concerns in The House

Lead-Based Paint: Peeling or deteriorating paint must be fixed if the home was built before 1978.
Asbestos: If present in old insulation, pipes, or flooring, it must not be deteriorating or flaking.
Pests and Infestation: No termite damage, rodent infestations, or other pest issues.
Mold and Mildew: FHA doesn’t expect perfection, but significant mold issues must be addressed.

Environmental Concerns Around The House

Sinkholes and Unstable Ground: If the land looks like it might collapse, that’s a major red flag.

Gas Drilling Sites: Active or planned drilling within 300 feet of the property? FHA won’t like it.

Abandoned Oil or Gas Wells: If there’s one within 10 feet, that’s a no-go.

Slush Pits: Any leftover industrial waste pits on or near the property? Not happening.

Heavy Traffic Noise: If the home is right next to a highway, airport, or train tracks, excessive noise might be an issue.

High-Pressure Gas or Petroleum Lines: If the home sits too close without proper safety measures, expect a problem.

Private Road Access

Legal Access: Property should be accessible by foot or vehicle, and there should be a permanent, recorded easement if access is via a private road.

Grading and Drainage 

Proper Drainage: Grading should direct water away from the foundation.

Soil Contamination

Visible Signs: Look for weird puddles, oily spots, or discolored dirt –basically, anything that looks like a chemical spill or a leaking underground tank.

What Happens After The FHA Inspection?

So, you’ve navigated the FHA appraisal, a crucial step in securing your dream home with an FHA loan. But what comes next? Let’s break down the post-appraisal journey so you know exactly what to expect.

Appraisal Report Submission

Once the FHA-approved appraiser completes their evaluation, they generate a detailed Uniform Residential Appraisal Report (Form 1004). This document assesses the property’s market value and condition, ensuring it aligns with FHA standards. The appraiser submits this report to your lender for review.

Lender Review and Underwriting

Your lender scrutinizes the appraisal to confirm that:

• The property’s value supports the loan amount.​
• The home meets the Department of Housing and Urban Development (HUD) guidelines.

If the appraisal aligns with these criteria, your loan file advances to the underwriting stage. At this point, the underwriters assess your financial profile to ensure you meet FHA loan requirements.

Addressing Required Repairs

Should the appraisal identify issues that don’t comply with FHA’s minimum property standards, such as safety hazards or structural problems, these must be rectified before loan approval. 

Typically, the seller is responsible for these repairs, but negotiations can lead to alternative arrangements. A follow-up inspection, known as a compliance inspection, may be necessary to verify that the repairs meet FHA guidelines.

Final Underwriting Approval

Once all repairs are completed and verified, the underwriter conducts a final review of your loan application. If everything is in order, you’ll receive a commitment letter detailing your loan terms, signaling you’re ready to close on the house of your dreams.

Closing the Deal

With underwriting approval secured, you move to the closing phase. You’ll sign the necessary documents, pay closing costs, and finalize your FHA loan during closing. Congratulations: You’re now a homeowner!

Is It Hard To Pass an FHA Home Inspection?

If you’re a first-time homebuyer using an FHA loan, you might wonder: Is it tough to pass the FHA home inspection? The short answer? It depends on the home.

Unlike a standard home inspection, an FHA appraisal isn’t just about looks but also about safety, security, and livability. While cosmetic flaws might not matter, FHA requires the home to be move-in ready with no health or safety hazards that could put the buyer at risk.

If the house is in decent shape with no major structural problems, you shouldn’t worry. Passing the FHA inspection shouldn’t be an issue. But if the home has serious defects, you might encounter some roadblocks.

Reasons an FHA Home Inspection May Fail

When pursuing an FHA loan, it’s essential to understand that the property must meet specific standards to ensure safety, soundness, and security. Here are common reasons a home might fail an FHA appraisal:​

Structural Deficiencies

• Foundation Issues
• Roof Problems.​
• Termite Damage

Safety Hazards

• Electrical Concerns
• Plumbing Failures
• Heating Deficiencies

Health Risks

• Lead-Based Paint
• Mold and Mildew
• Asbestos

External Issues

• Site Hazards
• Poor Drainage

What If The FHA Appraisal Uncover Issues?

If the FHA appraisal flags a problem, you’ll need to resolve it before moving on to underwriting. Depending on the issue, this could delay your closing date and may even require a second inspection to confirm that repairs were completed. The faster you address any needed fixes, the smoother your loan process will be.

There are a few common roadblocks that can arise during an FHA appraisal:

• The home doesn’t meet HUD’s Minimum Property Standards. If the property has structural issues, safety hazards, or non-functioning systems, the loan can’t proceed until repairs are made.

• The appraised value is lower than the agreed-upon purchase price. FHA won’t lend more than the home’s appraised value, so if it comes in low, you’ll need to negotiate.

• The seller refuses to complete the required repairs. If the seller won’t fix the issues, you may need to find another solution—or walk away from the deal.

• The buyer isn’t able (or willing) to cover the repair costs. If repairs are needed before closing, but the buyer can’t or won’t pay for them, the loan won’t be approved.

If any of these issues come up, your options may include renegotiating the price, requesting seller repairs, setting up an escrow holdback, or switching to an FHA 203(k) loan for renovations. The key is understanding FHA requirements upfront so you can avoid delays and keep your home purchase on track.

Bottom Line: FHA Loan Inspection Requirements

An FHA appraisal and inspection aren’t just another box to check, they’re a critical step in securing your loan. The FHA wants to ensure the home is safe, structurally sound, and move-in ready before approving financing. 

While cosmetic issues won’t be a dealbreaker, serious concerns like roof damage, faulty wiring, plumbing failures, or structural instability must be fixed before the loan can move forward.

The key to a smooth FHA loan process is knowing what to expect. If you’re buying a home with major issues, be prepared to negotiate repairs with the seller, explore an escrow holdback, or consider an FHA 203(k) loan for renovations. 

By understanding FHA inspection requirements upfront, you can avoid surprises, stay ahead of potential roadblocks, and get one step closer to homeownership.