Approved appraisers for the Federal Housing Administration (FHA) are in charge of determining the value of a property that is the subject of an FHA-insured mortgage application. The FHA helps people who may be unable to obtain a mortgage due to credit or employment issues obtain a mortgage at a low interest rate. Appraisers must also ensure that a property is safe and habitable for the prospective buyer. The main reason a mortgage lender hires an appraiser before processing a loan is to assess the risk to the lender if the property goes into foreclosure. In order to obtain both a license and certification, an FHA appraiser must complete specific education and training.
The FHA insures mortgages to protect lenders when providing funds to buy a home for a buyer whose credit may not meet the requirements for a non-FHA loan. Each lender hires an appraiser to determine the property’s value based on factors such as the property’s size, location, and condition. The average price of three comparable properties in the same area (often referred to as “comps”) of comparable size and condition is used FHA-approved appraisers to value a property. To provide a median value of the property to be mortgaged, all three properties have typically been sold within the previous 12 months.
The FHA appraiser’s primary concern is the safety and condition of the property being appraised, though the FHA guidelines do allow an appraiser to make basic judgments about the property’s condition. Appraisers can determine if a property is uninhabitable and advise against selling it through the FHA. Lenders are then given a list of repairs that must be completed in order for the property to be safe to live in. The lender may require the appraiser’s recommended repairs before the mortgage can be approved.
Lenders are responsible for locating and hiring an FHA appraiser to ensure that the potential losses associated with a foreclosure do not exceed the property’s value. Appraisers assess whether a property’s proposed purchase price is reasonable and reflects market value. The property value should be sufficient to allow the lender to reclaim the majority of the mortgage and associated costs in the event of a possible foreclosure.
Following completion of relevant education courses, each FHA appraiser should be state licensed or certified. Appraisers who want to be accepted the FHA as an approved appraiser must complete specialized education courses. Many lenders use their own appraisers who have been approved to appraise properties according to FHA guidelines.