Significance

• To determine the overall value of the home, the appraisal compares the home to three to five residences that are similar in size, age and location. The average value, minus adjustments for variances in the houses, is the appraised value of the home.
  
  

Function

• The FHA appraisal helps a lender to determine if the asset that the borrower is using as collateral is sufficient to cover the loan debt in the event of a default.
  
  

Time Frame

• An FHA appraisal is usually completed within one week of the application date of a mortgage loan. The borrower is more than likely required to pay for the appraisal out of pocket at the time of application.
  
  

Considerations

• An FHA appraisal is a more in-depth appraisal than a conventional mortgage with government regulations requiring more information about needed repairs and the values of other homes in the area.
  
  

Misconceptions

• While the tax value of a home matters, it is not the same as the appraised value of the home. However, if the appraised value comes in lower than the tax value, the borrower can contest the property tax value with the appraisal to see if he can lower his tax bill.