When you are in the market for a new home, one of the first things you need to do is get an appraisal. This will give you an idea of what your home is worth and help you decide how much money to offer. There are two types of appraisals: FHA and conventional. So, what’s the difference?
What is FHA Appraisal?
FHA appraisal is an appraisal done by a licensed appraiser to determine the value of a property being purchased using FHA financing. The FHA, or Federal Housing Administration, is a government agency that provides mortgage insurance on loans made by FHA-approved lenders. FHA appraisal is generally for properties being sold as part of an FHA loan transaction.
- In order for the FHA to insure a loan, the property must meet certain requirements, including minimum standards for safety, habitability, and security. The FHA appraiser will evaluate the property to ensure that it meets these standards. If the property does not meet the requirements, the FHA may not insure the loan.
- FHA appraisal is typically required when a property is being purchased with FHA financing. However, there are some circumstances in which an FHA-insured loan can be obtained without an appraisal. For instance, if the property is already owned by the borrower and is not being refinanced, an FHA appraisal may not be required.
- FHA appraisals are done by licensed appraisers who are familiar with FHA requirements. Appraisers who are not familiar with FHA standards may use different methods to value the property, which could result in a lower appraised value. When choosing an appraiser for an FHA appraisal, it is important to choose someone who is experienced in doing FHA appraisals.
What is Conventional Appraisal?
Conventional appraisal is the process of valuing a property by taking into account comparable sales in the area. The conventional appraisal can be used for both residential and commercial properties. The appraiser will look at recent sales of similar properties in the same area to determine the value of the property being appraised. A conventional appraisal is typically used for properties that are not unique, such as a single-family home or a small retail space. A conventional appraisal is less common for larger commercial properties, such as office buildings or shopping centers, because there are often fewer comparable sales to consider.
Difference between FHA and Conventional Appraisal
FHA and Conventional Appraisals are both required in order to obtain a mortgage loan, but they are different in several key ways. FHA Appraisals are performed by FHA-approved appraisers, and they are generally more lenient than Conventional Appraisals. For example, FHA Appraisers may be more willing to overlook minor repairs that need to be made to the property. In addition, FHA Appraisals typically have a lower market value than Conventional Appraisals. This is because FHA Appraisers use a different method for assessing the value of the property. As a result, borrowers who are hoping to get a lower interest rate may be better off getting a Conventional Appraisal.
So, what is the difference between an FHA appraisal and a conventional appraisal? The main difference is that an FHA appraisal is more rigorous and detailed. It includes a review of the property’s physical condition as well as its market value. A conventional appraisal may not include a physical inspection of the property, and it will likely only focus on the market value of the home. If you are considering purchasing a home with an FHA loan, be sure to understand the differences between these two types of appraisals so you know what to expect.