Conventional vs FHA Appraisal 2026: Six Differences That Affect Closing

MLOs often treat the appraisal as a commodity step in the process. For FHA versus conventional, that assumption creates unnecessary delays and declined deals. The two appraisal types differ significantly in property condition standards, appraiser eligibility, transferability, and the consequences of condition issues. Here is what actually changes between the two.

Six Key Differences

• ✦Property condition standards: FHA appraisers must flag and condition all HUD Minimum Property Standard violations; conventional appraisers apply UAD condition ratings (C1 to C6) but do not automatically require seller repairs
• ✦Appraiser eligibility: FHA requires the appraiser to be on the HUD FHA Appraiser Roster; conventional accepts any licensed or certified state appraiser
• ✦Lead paint: FHA requires stabilization of all chipping or peeling paint on pre-1978 properties; conventional has no such blanket requirement
• ✦Transferability: FHA appraisals transfer to any FHA lender within 120 days; conventional appraisals are lender-specific and do not transfer
• ✦Flip rule: FHA prohibits financing when the seller has owned for 90 days or fewer (with exceptions); conventional has no anti-flipping restriction
• ✦Second appraisal: FHA prohibits ordering a second appraisal for value (the first appraisal governs); conventional allows a second opinion under certain circumstances

When Conventional Beats FHA on Property

For properties with minor deferred maintenance, peeling paint on older homes, or short seller-ownership timelines, conventional appraisal standards are significantly more flexible. A borrower who can qualify for conventional (even at 5% down) may find the property eligible for conventional but ineligible for FHA solely due to appraisal condition standards.

When FHA Appraisal Transferability Matters

If an FHA borrower changes lenders during the loan process, the existing appraisal transfers. This protects the borrower from paying for a second appraisal and avoids delays. On conventional, a lender switch almost always means a new appraisal order, additional cost, and an additional two-week timeline hit.