FHA vs VA vs Conventional Appraisal Repair Rules: A Side-by-Side Comparison

FHA vs VA vs Conventional Appraisal Repair Rules: A Side-by-Side Comparison

The same property, appraised on the same day by the same appraiser, can produce zero repair conditions on a conventional loan and six on an FHA loan.

That isn't inconsistency. It's the programs doing different jobs. Understanding exactly where they diverge lets loan officers set expectations correctly at application — and lets buyers and agents choose financing with their eyes open.

The fundamental difference

Conventional loans are made to be sold to Fannie Mae or Freddie Mac. The appraisal primarily answers one question: is this property adequate collateral for this loan amount? Condition matters insofar as it affects value, marketability, safety, soundness, and structural integrity.

Government-backed loans — FHA, VA, USDA — add a second question: does this property meet the program's minimum standards? The agency is insuring or guaranteeing the loan, so it has a direct interest in the housing stock it stands behind. Those standards generate repair conditions that pure collateral analysis wouldn't.

Everything below follows from that distinction.

Side-by-side comparison

| Factor | Conventional | FHA | VA | USDA | |---|---|---|---|---| | Property standards framework | Safety, soundness, structural integrity; condition ratings | Minimum Property Requirements (MPR) | Minimum Property Requirements (MPR) | Program property standards | | Overall strictness | Least strict | Strict | Strict, with specific priorities | Strict, plus water/sewer testing | | Typical number of conditions | Fewest | Most on older homes | Comparable to FHA | High on rural properties | | Lead-based paint focus | Minimal | Heavy on pre-1978 homes | Heavy on pre-1978 homes | Present | | Peeling paint conditions | Only if it affects value/soundness | Very common | Very common | Common | | Handrails and guardrails | Sometimes | Commonly cited | Commonly cited | Commonly cited | | Roof remaining life | Condition-based | Explicit attention to remaining economic life | Explicit attention | Explicit attention | | Heat source required | Effectively yes | Yes — permanent, code-compliant | Yes | Yes | | Well and septic testing | Rarely required by the program | Required where applicable | Required where applicable | Most rigorous | | Termite / pest inspection | Rarely | Sometimes | Commonly required in designated areas | Sometimes | | Appraiser qualification | Standard licensing | Must be on the FHA roster | VA-assigned fee panel appraiser | Standard, program-aware | | Who typically pays for repairs | Most negotiable; often split | Commonly the seller | Commonly the seller | Commonly the seller | | Escrow holdback availability | Most available | Restricted | Restricted | Limited mechanism | | Condition rating impact | Significant — C5/C6 drives requirements | Present, but MPRs dominate | Present | Present |

Conventional: the collateral test

Conventional appraisals generate fewer repair conditions, but "fewer" isn't "none."

What triggers a conventional condition:

• Physical deficiencies affecting safety, soundness, or structural integrity — the appraiser answers a specific question about this on the form
• A condition rating of C5 or C6. This is the underappreciated one. C5 means obvious deferred maintenance with components needing repair; C6 means substantial damage or deferred maintenance affecting safety, soundness, or structural integrity. C6 generally must be cured, and C5 frequently drives requirements on its own.
• Anything materially affecting marketability
• Incomplete construction or improvements

What conventional generally doesn't chase: cosmetic peeling paint that isn't a soundness issue, missing handrails absent a genuine safety concern, dated finishes, or minor deferred maintenance that a C4 rating absorbs.

Practical implication: on an older home with cosmetic wear, conventional is materially the smoother path. And when repairs are required, conventional offers the most flexibility — escrow holdbacks are most readily available here, and the who-pays negotiation is most open.

FHA: the broadest requirement set

FHA appraisals are the ones loan officers brace for on older housing stock, because Minimum Property Requirements cover a wider surface area.

Where FHA is distinctly stricter:

Lead-based paint on pre-1978 homes. The defining difference. Defective paint surfaces on homes built before 1978 must be addressed, using lead-safe practices. This applies to exterior and interior surfaces, and to outbuildings, fences, sheds, and garages — which routinely surprises everyone. Painting over failing paint doesn't satisfy it; the surface must be stabilized. This single category generates more FHA conditions than anything else.

Peeling and chipping paint generally, even on post-1978 homes, where it affects the protective coating and exposes substrate to deterioration.

Handrails and guardrails. Commonly cited on stairs with the relevant number of risers and on elevated decks and landings.

Roof condition and remaining economic life. Explicit attention, not just leak-based.

Functioning permanent heat source. Space heaters and non-permanent solutions don't satisfy it.

Water heater safety — relief valve discharge lines, and seismic strapping in applicable jurisdictions.

Utilities on and all systems demonstrably functional at inspection.

Appraiser qualification: FHA appraisals must be performed by an appraiser on the FHA roster, which is a smaller pool than the general licensed population — worth knowing when scheduling is tight.

Practical implication: on a pre-1978 home with any exterior paint deterioration, expect conditions. Budget for it and set expectations at application rather than at appraisal delivery. Also expect the seller to be asked to pay, since the repairs are required to make the property eligible and there are limits on what the buyer can be charged.

VA: comparable strictness, different emphases

VA Minimum Property Requirements exist to protect veteran borrowers, and they're comparably strict to FHA with some distinct characteristics.

Where VA has its own emphasis:

Pest and termite inspection is commonly required in designated geographic areas, and infestation findings generate conditions. This is more prominent on VA than on other programs.

Safe and sanitary living conditions, framed around habitability.

Adequate mechanical systems — heating, plumbing, electrical in working order.

Roof condition, with attention to remaining life.

Lead-based paint on pre-1978 homes, similar to FHA.

Safe access to the property and living areas.

Appraiser assignment: VA uses its own fee panel and assignment process rather than the lender selecting the appraiser, which affects both scheduling and turn time.

Fee restrictions: VA rules limit certain costs a veteran buyer may pay, which is part of why sellers commonly absorb MPR repairs on VA transactions. Loan officers should raise this with listing agents early — it's a legitimate program characteristic, not a negotiating tactic.

Practical implication: VA conditions land similarly to FHA in volume, with pest inspection as the extra wildcard in designated areas. The scheduling dynamics of panel assignment deserve a few extra days in your timeline.

USDA: the rural complication

USDA appraisals apply program property standards comparable in spirit to FHA and VA, but the defining characteristic is different: private water and sewer.

Because USDA-eligible properties are rural by definition, a large share have well and septic systems rather than municipal utilities. That triggers:

• Water quality testing against applicable standards, with results from an approved lab
• Well location and construction requirements, including separation distances
• Septic system inspection and certification
• Health department involvement in many jurisdictions

The problem isn't difficulty — it's turnaround time you cannot compress. Lab results take days. Health department certifications take days to weeks. Septic contractors in rural markets have limited availability. None of this responds to urgency.

There's also a guarantee review step in the USDA process that adds days on the back end.

Practical implication: on a USDA file with private water and sewer, start the testing at contract, not after the appraisal. This is the single highest-value scheduling decision on these files, and it's routinely missed. A file that begins water testing on day 3 closes weeks earlier than one that begins on day 25.

Which program is strictest? A ranked answer

For repair conditions on an older home:

1. FHA (most conditions, driven by lead paint and MPR breadth)
2. VA (comparable, with pest inspection as an extra)
3. USDA (comparable, plus water and sewer)
4. Conventional (fewest)

For total timeline risk:

1. USDA (uncompressible lab and health department turnaround)
2. VA (panel assignment scheduling)
3. FHA (volume of conditions)
4. Conventional (fewest and most flexible)

For flexibility once conditions exist:

1. Conventional (escrow holdbacks most available, negotiation most open)
2. USDA (limited mechanism)
3. FHA and VA (most restricted — safety items must be complete)

What this means at application

The most valuable thing a loan officer can do is have this conversation at application, not at appraisal delivery.

On a pre-1978 home with visible exterior paint deterioration, financed with FHA or VA: say plainly that repair conditions are likely, that the paint requirement extends to outbuildings and fences, and that a repair phase of two to four weeks is a realistic possibility. Then build the lock accordingly — a 60-day lock priced up front usually beats a 30-day lock plus two extensions.

On a rural property with well and septic, financed with USDA: get the water test ordered at contract. Say out loud that lab and health department turnaround is not compressible.

On a conventional file: note that the condition rating matters, and that C5 or C6 changes the conversation even without a specific safety citation.

Where a buyer has program flexibility and the property is an older home with cosmetic wear, conventional may genuinely close faster and with fewer repairs — a real consideration worth raising, alongside the down payment and mortgage insurance math.

The universal rules, regardless of program

Whatever the program, these hold:

• Get the underwriting condition list verbatim before spending anything
• Match the appraiser's exact wording — certification is against the citation, not against equivalent effort
• Use licensed contractors on electrical, plumbing, HVAC, roofing, structural, and lead-related work
• Fix first, settle who pays at closing — the delay costs more than the repair
• Complete everything in one pass and clear the 1004D on the first visit
• Document as you go: dated before and after photos, itemized invoices with license numbers, permits where required

How AppraisalFix shortens this timeline

The repair itself is rarely the bottleneck — the search is. A homeowner gets a repair list, then starts cold-calling contractors who don't return calls, can't produce insurance certificates, or can't start for three weeks. Meanwhile the rate lock burns.

AppraisalFix was built for exactly this window. We read the appraisal, isolate the lender-required items, match the file to licensed and insured repair professionals already vetted in that market, document the completed work with before/after photos and receipts, and coordinate the 1004D recertification with the original appraiser. Program differences mostly change what is on the list, not how it gets closed out — we handle the same core work either way: verbatim scoping, licensed pros, documentation, and a first-pass 1004D.

Have an appraisal with repair conditions? Submit the report and we'll return a scoped repair plan with vetted local pros — usually within 24 hours.

Frequently asked questions

Which loan program has the strictest appraisal repair requirements?

FHA generally produces the most conditions on older homes, driven largely by lead-based paint requirements on pre-1978 properties and the breadth of Minimum Property Requirements. VA is comparable, USDA adds well and septic testing, and conventional is the least strict.

Why does FHA require peeling paint to be fixed?

On pre-1978 homes, defective paint surfaces must be addressed using lead-safe practices because of lead-based paint concerns — and the requirement extends to outbuildings, fences, and garages, not just the main structure.

Are conventional loans easier for properties needing repairs?

Generally yes. Conventional appraisals focus on value, marketability, safety, soundness, and structural integrity rather than a broad property-standards checklist, and escrow holdbacks are most available on conventional loans.

Do VA loans require a termite inspection?

Commonly, in designated geographic areas. Pest and termite findings are a more prominent source of VA conditions than on other programs.

What makes USDA appraisals slower?

Private water and sewer. Water quality testing, septic certification, and health department involvement have turnaround times that can't be compressed, plus USDA adds a guarantee review step. Start testing at contract, not after the appraisal.

Who pays for repairs on each program?

It's always negotiable, but in practice sellers commonly absorb repairs on FHA, VA, and USDA — since the work is needed for property eligibility and program rules limit certain buyer costs. Conventional is the most openly negotiated.

The bottom line

Conventional asks whether the property is adequate collateral; FHA, VA, and USDA also ask whether it meets program standards — which is why the same house generates different repair lists. FHA is strictest on older homes because of lead paint, VA adds pest inspection, USDA adds uncompressible water and sewer testing, and conventional is both the most forgiving and the most flexible when repairs do come up.