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Most mortgages and refinance loans require a new home appraisal to find the fair market value of the home.
A home appraisal helps a mortgage lender ensure the home is worth the amount they are lending.
Appraisals help borrowers, too. After all, no one wants to pay more for a home than what it’s worth.
Not every loan needs one. For some one-unit homes, Fannie Mae and Freddie Mac can waive the appraisal when their systems find that the value is well supported. Lenders call this an appraisal waiver or “value acceptance.” FHA and VA purchase loans still require an appraisal.
Check your home buying eligibility. Start here (Nov 1st, 2026)
What is a home appraisal?
The home appraisal process collects several kinds of data to arrive at a home’s fair market value. Most data points fall into two categories:
- The home itself: A real estate appraiser assesses the home you’re buying. The home’s condition, square footage, number of bedrooms and closets, functionality, landscaping, recent upgrades and its location will affect its market value.
- Local housing market conditions: No property exists in a vacuum. The behavior of the housing market affects a property appraisal. Recent sales of similar homes in the area, known as comparable properties or “comps,” help real estate appraisers arrive at a property value.
The appraiser should cite both kinds of data in the home appraisal report which goes directly to the lender.
A home appraisal is not the same as a home inspection. Yes, the appraiser will check out the home’s condition but only for the purposes of arriving at a valuation.
Be sure to order an independent home inspection to get a full picture of the overall condition of the home before buying.
Home appraisal checklist
Here’s a list of things a home appraisal will ordinarily check to find the value of a home:
- The structural condition of your home
- The home’s square footage and the size of the lot
- The home’s curb appeal
- The number of bedrooms, closets, and bathrooms
- The quality of the home’s electrical and plumbing systems
- The condition of the basement or crawl space
- The quality of the home’s countertops, cabinets, and fixtures
Also, the appraiser will check out outdoor amenities such as swimming pools, pool houses, permanent sprinkler systems, garages, and driveways.
Appraisal problems that can affect the home buying process
A residential appraisal for a single-family home is a routine part of the home buying process. Mortgage lenders order property appraisals and read appraisal reports every day.
But sometimes appraisal problems can slow or even stop the mortgage approval process.
This can be frustrating, especially for first-time home buyers. But in many cases, borrowers can get their mortgage loan back on track.
Here are some common home appraisal problems:
1. Appraised value falls below the sale price
A mortgage company will order an independent appraisal to find the home’s value. It does this regardless of the asking price, contracted purchase price or automated values listed on websites like Zillow.
The lender will order an appraisal from a licensed appraiser. If the appraiser’s valuation comes in lower than the agreed-upon sales price, the loan can’t move forward as is.
A lender bases the loan on the lower of the sales price or the appraised value. To get the loan back on track, the seller can drop the sales price to the appraised value, or you and the seller can split the difference. Or, the buyer could make up the difference, in cash, by making a larger-than-required down payment. If your contract has an appraisal contingency, you may also be able to cancel the contract.
Paying the gap yourself can work, but there are risks. It would mean you’re paying more for the home than it’s worth. You may even be entering home ownership with negative home equity.
You can also ask for a reconsideration of value (ROV). Your lender must give you a copy of the appraisal promptly after it is done, and no later than three business days before closing unless you waive that timing. If you think the appraisal is wrong, ask your lender how to submit an ROV. Your Realtor can help you find comparable sales to support it.
On a VA loan, the appraiser must tell the requester when the value looks likely to come in below the price. The agent, lender or veteran then gets about two days to send market data. A veteran can still request an ROV after the VA issues its value notice. No request is guaranteed to change the value.
2. How deferred maintenance creates appraisal problems
Appraisers evaluate properties as they are at the time of the appraisal.
This means the appraiser inspects the property based on its current condition and values minor wear “as is.” If a problem affects safety or soundness, the appraiser may value the home “subject to” completion of repairs. The lender then needs proof of the completed work, usually before closing.
Properties must meet certain minimum standards before a lender will approve the loan. If there is evidence of major deferred maintenance, the lender will usually require repairs before closing. Fannie Mae rates a home’s condition from C1 to C6. It will not buy a loan on a C6 home until repairs address the problems that affect safety, soundness or structure.
One of the most common deferred maintenance items is roof repairs. If the roof appears to be in poor condition in the appraisal pictures, then often lenders will ask for a certification from a roof inspector estimating the remaining life of the roof.
Other deferred maintenance problems that an appraiser may flag include:
- Broken window panes
- Leaking water lines
- Missing handrails
- Outdated HVAC systems
- Noticeable electrical problems
Government-backed mortgages, like FHA, VA and USDA loans, have some additional property standards that conventional loans don’t. For example, all properties built before 1978 require repairs for peeling paint due to lead paint concerns.
Generally, sellers defer maintenance to save money, but delaying repairs can halt the sales process altogether. In fact, lenders will ask for many repairs before issuing a home purchase loan.
3. Habitability concerns can cause appraisal problems
Excessive deferred maintenance can jeopardize the home’s habitability which could make the home ineligible for a mortgage loan. This can be particularly true of appraisals for FHA loans, which have stricter requirements.
If an appraiser notices structural issues such as cracks in the foundation, the home’s value can fall dramatically. Cracks suggest unstable settling of the property. This often will prompt an engineer’s report to determine whether or not the foundation is in proper shape.
Foundation repairs can be costly. The average cost is about $5,200, while serious structural work such as piering or leveling can cost $10,000 to $25,000 or more.
Lenders often won’t approve home loans for properties that need such extensive repairs, but renovation mortgages let borrowers finance the home as well as the needed repairs in one loan.
Two common renovation loan types: the FHA 203(k) Rehab Mortgage (government-backed) and Fannie Mae’s HomeStyle Renovation Mortgage (conventional).
Check your renovation loan options. Start here (Nov 1st, 2026)
4. Unique property without local comparisons
The appraisal reflects data that compares the market value of your home with similar properties that have sold in the area. The key word here is “similar.”
For example, if you’re buying a duplex and there are no duplexes around for miles, then there are no comparable sales with which the appraiser can determine value.
Extreme examples would be atypical properties like a geodesic dome, log cabin, or barndominium, which are rare in most areas. These sorts of properties can cause problems that slow down the appraisal process.
If you’re buying an unusual type of property, talk to your loan officer about the appraisal process before applying for your loan. Your loan officer may be able to find a licensed appraiser who has experience with unusual structures.
5. Declining market in the neighborhood
The appraiser must assess the real estate market in the neighborhood by selecting one of three choices: increasing, stable or declining.
If the property is in a neighborhood that has experienced declining values over the previous 12 months, the appraiser must explain why. The appraiser must also pay close attention to seller concessions and to homes that are listed but haven’t sold. A lender can also set stricter limits of its own in a declining market and ask for more money down, regardless of what the final value may be.
If the borrower doesn’t have the extra money for a larger down payment, the lender could decline their mortgage.
Will a bank finance a house with asbestos?
A lot of older homes still have asbestos which is dangerous if inhaled. If your home’s appraiser finds asbestos, will the loan move forward?
The short answer is: It depends. The presence of asbestos may become an issue for government-backed loans with strict minimum property standards.
Most houses built before 1980 have some form of building material that contains asbestos. If the building material is in good condition and undisturbed, the harmful fibers aren’t airborne, which is where the health hazard occurs. Material that crumbles easily by hand is called friable, and it is more likely to release fibers.
Common building materials that may contain asbestos:
- Insulation
- Floor and ceiling tiles
- Siding
- Roof shingles
- Flooring glue
The biggest health risk posed by asbestos is during remodels or renovations when the asbestos-laden building materials can get damaged and cause the fibers to become airborne.
Laws pertaining to asbestos vary by state. Many require that homeowners test for asbestos as well as have it removed by a licensed asbestos contractor prior to starting any renovation projects.
Why do I need an appraisal to refinance?
When you’re refinancing an existing mortgage loan, an appraisal measures the value of the home. This lets the lender calculate your equity, or the part of your home you’ve already paid off.
The appraisal helps the mortgage lender to ensure that it’s not lending more than the home is worth. It can also help to determine the mortgage rate and loan options available to you.
Finally, lenders usually require an appraisal for a cash-out refinance to verify how much equity the homeowner has available to borrow.
Though conventional wisdom says you need 20 percent home equity to refinance, there are loan programs that will allow you to refinance even when you have less equity. For example, if Fannie Mae owns your fixed-rate loan, a limited cash-out refinance of a one-unit primary home can go up to 97 percent of the home’s value. Freddie Mac’s Refi Possible program also allows 97 percent for borrowers with income at or below the area median, if Freddie Mac owns the loan. That means as little as 3 percent home equity, though you’ll need to pay PMI on the refinance loan. Your servicer can tell you whether Fannie Mae or Freddie Mac owns your loan.
There are a few loan types that can allow a homeowner to refinance without an appraisal, including the Streamline Refinances available to homeowners with VA, FHA or USDA loans. However, they’re only available for eligible borrowers who are looking for the same loan type they already have: an FHA borrower can use only the FHA Streamline Refinance; a VA homeowner can use the VA’s Streamline Refi; and so on.
A home appraisal to eliminate PMI
Even if you’re not refinancing, a home appraisal could lower your monthly payments on a conventional loan. The savings can come from eliminating private mortgage insurance, or PMI.
Conventional loans require PMI as long as you owe more than 80 percent of your home’s value to your lender. This insurance protects the lender from losing money in case of foreclosure.
Once your balance reaches 80 percent of the home’s original value, you can ask your servicer to cancel PMI. You need to be current on your payments, and the servicer may ask for proof that the home hasn’t lost value. PMI ends automatically on the date your balance is scheduled to reach 78 percent, if you are current. Either way, it could save money on your house payment each month. PMI rates vary based on your credit score, down payment and loan size. It’s common to pay $150 or more for PMI each month.
Even if you haven’t paid your balance down to 80 percent of your home’s original selling price, you may have 20 percent in home equity if the value of your home has increased significantly since you closed on the loan.
For a loan owned by Fannie Mae, the loan must be at least two years old. Your balance must be 75 percent or less of the current value if the loan is two to five years old, or 80 percent or less after five years. You also need a good payment history, and you usually pay for the appraisal. Ask your servicer for its exact rules.
To prove to your lender that your home is worth enough to eliminate the need for PMI, get a new home appraisal.
House appraisal FAQs
What does an appraiser look at in a house?
A licensed home appraiser looks at the home’s condition and location as well as local market conditions. The appraiser will check the general structure and functionality of the home, but only for the purpose of assessing the home’s value. You’ll still need a home inspector to check out the home’s systems and to be sure things like the water heater, air conditioning, and fireplaces are working properly.
What will fail a home appraisal?
Different loan types have different minimum requirements for home appraisals. Government-insured loans like FHA and VA loans tend to have stricter requirements. For example, the VA has its own appraisal process which looks for the VA’s Minimum Property Requirements. FHA appraisers check the home against the minimum property standards in HUD Handbook 4000.1.
How much does a home appraisal cost?
Appraisal fees vary based on the home’s size and location. Typical appraisal fees vary from $300 to $800.
How should I prepare for a home appraisal?
The home buyer is not involved in the home appraisal process. The seller can prepare by making repairs and removing clutter to make the home more accessible to the appraiser.
How long does a house appraisal take?
The on-site part of the appraisal should take only a few hours to complete. But the appraiser also has to research recent sales of comparable homes and prepare the appraisal report. Lenders often wait up to 10 business days from ordering the appraisal to receiving the appraisal report.
What happens after the appraisal?
After the appraisal, the lender uses the valuation to set the maximum loan size for the home. If your loan requires a 5 percent down payment and the home is appraised at $300,000, the lender won’t issue a loan larger than $285,000, which is 95 percent of $300,000.
What lowers a home appraisal?
Appraisal problems ranging from deferred maintenance on the home to cool market conditions can lower a home’s appraised value. Recent sales in the neighborhood will help determine the market value of the home. So if sales have been slow, or if sellers have been accepting lower offers, the value of all homes in the area can be affected.
Does a messy house affect an appraisal?
No, a messy house will not directly affect the property value. Licensed appraisers learn to look beyond superficial and temporary conditions, like cluttered countertops and unswept floors, to find the home’s fair market value. However, curb appeal can influence a home’s fair market value.
How to avoid a low home appraisal
A low appraisal can stall your home purchase or refinance loan. If you’re worried about getting a low appraisal, talk to your real estate agent or loan officer before the lender orders the appraisal.
Your Realtor and loan officer should be able to help identify potential appraisal problems that can put your mortgage at risk.
Speak to a licensed mortgage professional about your home loan eligibility (Nov 1st, 2026)
