A home won’t pass an FHA inspection when it fails HUD’s minimum requirements for safety, security, and structural soundness. That covers foundation and roof damage, broken heating or plumbing, unsafe electrical work, contaminated well water, deteriorated lead paint in older homes, missing handrails or bedroom escape routes, and site problems like encroachments or proximity to high-voltage lines. The FHA appraiser flags any of these in the report, and the lender will not close the loan until each one is corrected.
Cosmetic flaws are a different story, and the distinction between an FHA appraisal and a private home inspection matters. More on both below.
Foundation, Framing, and Pest Damage
The shell of the house has to be sound enough to protect the people inside and hold value for the life of the loan. Significant foundation cracks, wood rot in load-bearing beams, and sagging floors or walls all point to compromised structure and will fail the appraisal. The appraiser works from a visual inspection of accessible areas, so damage that’s readily observable gets flagged even when the full extent is unknown.
Wood-destroying insects fall in the same bucket. FHA requires a pest inspection when the appraiser sees signs of active infestation, when state or local law requires one, or when it is customary in the area. The property must be free of active infestation before closing, and any structural damage caused by pests must be repaired.1HUD Archives. HOC Reference Guide – Pest Control
Roof Problems
The roof must have a remaining useful life of at least two years. If the appraiser judges it doesn’t, that finding goes in the report and typically triggers repair or replacement before closing.2HUD Archives. HOC Reference Guide – Roofs and Attics
FHA also caps roofing layers at three. If more than two layers already exist and the roof needs work, everything has to be stripped before new material goes on.2HUD Archives. HOC Reference Guide – Roofs and Attics Active leaks, visible holes, and missing shingles that expose the underlayment are automatic fails.
Attic ventilation gets checked too. Poor airflow traps moisture, which rots the roof from below and encourages mold, so HUD looks for a minimum free ventilation area proportional to the attic floor with vents distributed between the upper portion and the eaves.
Heating, Plumbing, and Electrical
Every mechanical system in the home has to be functional the day the appraiser walks through. A system that is off, disconnected, or inaccessible cannot be evaluated, so utilities need to be on before the visit or the appraiser will come back at extra cost.
Heat
The permanently installed heating source must keep the home at a livable temperature. A home is deficient if that source doesn’t work or if the interior falls below 64 degrees Fahrenheit during the heating season, October 1 through March 31.3U.S. Department of Housing and Urban Development. NSPIRE Standard – HVAC Portable space heaters don’t count.
Plumbing and Sewage
Significant leaks, chronically low water pressure, and broken fixtures all raise concerns. A failing septic system or broken sewer connection is treated as a health hazard. On septic properties, the well generally needs to be at least 50 feet from the septic tank and 100 feet from the drain field.
Electrical
Frayed wiring, exposed junction boxes, missing outlet covers, and panels without proper grounding or adequate capacity all get flagged. The appraiser isn’t an electrician, but readily observable defects will be called out, and a licensed electrician’s evaluation may be required before the loan moves forward.
Well Water and Septic Setbacks
If the home draws from a private well, FHA requires a water quality test covering coliform bacteria, nitrates, nitrites, and lead. Water that fails must be corrected through treatment, a new well, or connection to a public system, and then retested before closing.
The well itself has to sit at least 10 feet from the property line, along with meeting the septic setbacks above. A well that violates spacing rules can make the property ineligible for FHA financing altogether.
Lead Paint, Mold, and Asbestos
Any home built before 1978 triggers a lead paint evaluation. The appraiser checks interior and exterior surfaces, including garages and sheds, for chipping, peeling, or flaking paint.4U.S. Environmental Protection Agency. Lead-Based Paint Disclosure Rule, Section 1018 of Title X Deteriorated paint has to be stabilized before closing, and for FHA-financed purchases HUD arranges or requires a lead-based paint inspection and delivers a stabilization plan when hazards are found.5U.S. Department of Housing and Urban Development. Lead-Based Paint Disclosure Addendum The work must be done by EPA-certified firms.
Visible mold, mildew, or water stains on walls, ceilings, or mechanical equipment require the appraiser to condition the appraisal on repair or inspection by a qualified professional to identify the source and the fix.6U.S. Department of Housing and Urban Development. Valuation Protocol, Appendix D Standing water or excessive dampness in a basement or crawl space triggers the same treatment.
HUD requires properties in its programs to be free of hazardous materials that could affect occupant health.7U.S. Department of Housing and Urban Development. Site Contamination – Environmental Review Friable asbestos, the kind that crumbles and releases fibers, needs professional abatement. Non-friable asbestos in stable condition, such as intact floor tiles, is generally not flagged.
Site Hazards
Grading that sends water toward the foundation instead of away from it will be noted, as will heavy vegetation touching the walls or overhanging the roof. Both invite moisture, pest, and fire damage.
Power lines get their own rule. No dwelling or related improvement can sit within the fall distance of any pole or tower carrying a high-voltage transmission line, generally 12 kilovolts and above, or supporting a radio, TV, or microwave relay tower. The appraiser uses the tower’s height as the fall distance. A home inside that zone is ineligible.8U.S. Department of Housing and Urban Development. Valuation Analysis – High-Voltage Transmission Lines Low-voltage distribution lines can’t pass directly over any structure on the property, pools included.
Missing Safety Features
Stairways with four or more risers need a handrail, and elevated decks, porches, and balconies need railings.9U.S. Department of Housing and Urban Development. NSPIRE Standard – Handrail Missing or loose handrails are one of the most common and easiest failures to correct.
Every bedroom needs a way out in a fire. For basement bedrooms, the window sill can’t sit higher than 44 inches from the floor, and the opening has to measure at least 24 by 36 inches clear.10U.S. Department of Housing and Urban Development. Property Analysis – General Acceptability Criteria Security bars are allowed only if they meet local fire codes and open from the inside without tools. An enclosed patio with solid walls blocking a bedroom window can strip that room of its bedroom status.
A swimming pool has to meet local barrier and fencing rules. An unfenced or improperly fenced pool is a safety hazard that must be corrected before closing.
Kitchen, Bathroom, and Crawl Space Basics
The kitchen must include a sink, a cooking appliance, a refrigerator, a food preparation surface, and food storage.11eCFR. 24 CFR 5.703 – National Standards for the Condition of HUD Housing Bank-owned properties sold “as-is” often lose the stove or refrigerator, and that alone will fail the appraisal. Bathroom fixtures must work, and living spaces must be accessible.
Crawl spaces have to be accessible for inspection, adequately ventilated, and protected by a vapor barrier. Standing water, excessive dampness, or a missing barrier gets flagged.
Access and Encroachments
The property needs safe pedestrian and vehicular access from a public or private street. A private street or shared driveway has to be protected by a permanent recorded easement or maintained by a homeowners association.12U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1 – Access to Property No legal access, no FHA loan.
Encroachments generally make a property ineligible. A garage that crosses onto a neighbor’s lot, an addition that breaks the setback, or a fence sitting on a utility easement can all disqualify the home. The exception is a perpetual encroachment easement recorded with the county.13U.S. Department of Housing and Urban Development. Property Analysis – Easements, Restrictions or Encroachments
What the Appraiser Won’t Fail You For
FHA appraisals look at safety, security, and structural soundness, not looks. Worn carpet, dated cabinets, scuffed walls, hairline drywall cracks that don’t indicate movement, and old-but-working fixtures are not grounds for failure. A house can feel tired and still pass, as long as every system works and nothing threatens the occupants or the structure.
This is where buyers sometimes confuse a failed appraisal with a failed home inspection. A home inspection is a detailed evaluation you commission for yourself. The FHA appraisal only checks whether the property clears HUD’s minimum bar. Plenty of homes pass the appraisal while still carrying issues a home inspector would want addressed.
What to Do If the Appraisal Fails
A failed appraisal doesn’t automatically end the deal. The most direct path is for the seller to complete the required repairs before closing. The appraiser then returns for a compliance inspection, usually $100 to $300, to verify the work.
For minor issues, FHA allows a repair escrow holdback. The cost of the small repairs is set aside in escrow, and the work is finished after closing, typically within 30 days. The property has to be safe and habitable in the meantime.
For bigger problems, the FHA 203(k) rehabilitation loan lets you finance repairs into the mortgage. The Limited 203(k) covers up to $75,000 in repair costs.14U.S. Department of Housing and Urban Development. 203(k) Rehabilitation Mortgage Insurance Program Types The Standard 203(k) covers larger renovations with no dollar cap but requires a HUD-approved consultant to oversee the project. Either option can turn a home that would otherwise fail into one you can actually buy, as long as the planned work brings it up to standard.
One timing note: an FHA appraisal is valid for 120 days from the effective date. If repairs or negotiations push past that window, the appraisal can be extended 30 days under limited conditions, such as an already-approved borrower or a signed sales contract before the original expiration. After that, expect a new appraisal or an update.