Home Inspections and Mortgage Approval in 2026: What MLOs Need to Know

A home inspection is not a lender requirement on conventional loans, but what an inspector finds can absolutely affect the mortgage. Buyers who waive inspections in competitive markets sometimes discover post-closing that conditions would have made the property unfinanceable under FHA or VA. MLOs need to understand this distinction and communicate it clearly before contract.

Program-Level Inspection Requirements

• ✦Conventional: no required inspection; lender relies on appraisal to identify property condition issues; appraisers flag only readily observable problems
• ✦FHA: no separate inspection required but FHA appraisal standards (HUD 4000.1) require the appraiser to note safety, security, and soundness issues; these become required repairs before closing
• ✦VA: VA appraisers apply Minimum Property Requirements and flag issues including roof condition, foundation, HVAC, plumbing, and electrical; MPR failures require repair or VA waiver
• ✦USDA: similar to FHA; the USDA appraisal includes a basic condition review and flags items that make the property ineligible

When an Inspection Kills the File

The danger zone is an FHA or VA file where the buyer did not do a pre-offer inspection. If the appraiser flags a major repair, the seller must either make the repair before closing or the deal dies. Sellers of distressed properties often refuse to make repairs. On conventional loans the buyer can waive inspection contingencies and the appraiser may not catch the same issues -- but the property still needs to meet basic habitability standards.

How to Advise Buyers

Tell FHA and VA buyers clearly that their appraisal is not a substitute for an inspection and that the appraisal may trigger required repairs the seller may not agree to. In competitive markets, recommend buyers do a pre-offer inspection or a short inspection period rather than a full waiver on government loan transactions.