The FHA loan program comes with specialized guidelines and requirements compared to conventional mortgages. One key question for FHA borrowers is – who covers the mandatory cost of the appraisal when using this government-backed financing?
Who pays for appraisal on FHA loan?
In FHA loans, the lender initially pays for the appraisal. However, the buyer is ultimately responsible for reimbursing this cost either upfront at mortgage application or incorporated into the final loan amount. Therefore, buyers should anticipate this expense in their budgeting.
For FHA loans, payment for the appraisal works like this:
- The lender places the initial order for the appraisal and pays the appraiser upfront when due
- However, standard FHA guidelines require the borrower ultimately foot the bill and reimburse the lender for appraisal costs
- Most lenders simplify this by collecting the full appraisal fee directly from the buyer when they apply for the FHA mortgage
- In certain cases the appraisal cost can be rolled into and paid through the final mortgage amount instead
So while there is technicality around the lender paying the appraiser first, the reality is that the buyer bears responsibility for the appraisal expense when using FHA financing.
Appraisal Costs for FHA Loan
Typical appraisal costs for FHA loans range from about $450 on the low end to $650 for Illinois properties.
How do appraisal fees work with conventional loans?
By contrast, here is how appraisal fees work with conventional loans:
- The fee is still paid upfront before the appraisal is ordered, like FHA
- But sellers or lenders will sometimes agree to cover some or all appraisal costs as part of the buyer’s closing expenses
Unfortunately this flexibility to negotiate who pays the appraisal is not an option with FHA mortgages. Borrowers should be prepared to pay these mandatory third-party fees in order to move forward.
Concerned about affording an Appraisal?
FHA buyers concerned about affording appraisals can:
- Ask sellers to provide a credit covering the appraisal or other closing costs
- Seek lenders offering appraisal fee waivers for certain scenarios
- Utilize the EMD Grant if a qualified first-time low/moderate income buyer
Learn more about
- What does a home appraisal cost?
- Who pays for appraisal if deal falls through?
- Paying for appraisal before loan approval
Having the inside scoop on appraisal fee obligations keeps the FHA mortgage process smooth. Be sure to account for this required borrower-paid cost in your home buying budget.
