The offer gets accepted on a Tuesday. By Friday you have an inspection report, a homeowner’s insurance quote, and a lender email asking for two months of bank statements. Somewhere in that pile is the step most buyers underestimate: the appraisal. It’s the one part of a conventional loan where a stranger’s opinion of your future house can rewrite the math of the entire deal.
Conventional loan appraisal requirements come from Fannie Mae and Freddie Mac, not from your lender, which is why the rules feel oddly specific and occasionally rigid. Knowing what an appraiser is required to document before they ever knock on the door is the difference between a clean closing and a three-week detour.
Who Orders the Appraisal, and Why You Can’t Pick the Appraiser
You don’t hire the appraiser. Your lender does, and since the appraisal independence rules that followed the 2008 housing collapse, most lenders route the order through an appraisal management company. Loan officers are barred from hand-picking or coaching the appraiser, and any attempt to influence a value is a federal violation. If you have information the appraiser should see, it goes to your lender, who forwards it.
Cost runs roughly $450 to $800 for a typical single-family home, and you usually pay it upfront or at closing. Turnaround is commonly five to ten business days, though rural properties and two-to-four-unit buildings can take longer and cost more. The finished report has a shelf life, too: for most conventional loans the appraisal is valid for 120 days from its effective date. If your closing slips past that window, expect to pay for a second one.
The Baseline Requirements Fannie Mae and Freddie Mac Set
A conventional appraisal isn’t a free-form essay. It has to be delivered on an approved form, typically the Uniform Residential Appraisal Report (Form 1004) for a single-family home, and completed by a state-licensed or state-certified appraiser. Both agencies expect an interior and exterior inspection, not a drive-by estimate, along with photographs of the front, back, street scene, kitchen, bathrooms, and any recent updates.
Three requirements trip people up most often:
- Comparable sales. The appraiser needs at least three closed sales of similar homes, ideally within the last six months and within a reasonable distance. Older or distant comps weaken the report and invite underwriter questions.
- Measured living area. Gross living area is measured and reported separately from basement space, and only heated, finished, above-grade rooms count. A finished basement is valued, but it is not square footage in the same sense.
- As-is market value. The appraiser gives an opinion of value based on the property’s current condition, plus a separate list of any repairs required for the loan to close.
Value acceptance and appraisal waivers
Not every conventional loan gets a full appraisal. Fannie Mae’s value acceptance program (long known as a property inspection waiver) and Freddie Mac’s automated collateral evaluation can let a loan skip the appraisal entirely when the automated underwriting findings allow it. These waivers usually depend on a strong credit profile, a loan-to-value ratio at or below 80%, and a property type the agencies are comfortable with. Your lender will tell you whether you qualify, but don’t count on it before the file runs.
Property Condition: Where Conventional Appraisals Actually Go Sideways
Value is only half the report. The other half is condition, and this is where deals quietly fall apart. Fannie and Freddie require the property to be safe, sound, and structurally secure, and appraisers grade condition on a six-point scale. Anything rated C5 or C6 (deferred maintenance or substantial damage) is generally ineligible for conventional financing until the work is done.
Common flags include an active roof leak, missing flooring or fixtures, exposed wiring, a broken furnace, unsafe steps without a railing, and non-permitted additions that the appraiser refuses to include in the living area. Peeling exterior paint on a pre-1978 home also draws attention because of lead-based paint rules, even though the requirements differ from FHA.
You can’t just escrow the repairs
This is the big difference from government-backed loans. Conventional financing does not offer a repair escrow on an existing home. If the appraiser marks the report “subject to” a new roof or a completed bathroom, that work happens before closing, and the appraiser returns for a re-inspection. Budget $100 to $200 for the trip and factor in the contractor’s timeline. Sellers sometimes agree to fix items in the purchase contract, but only if the request lands before your inspection contingency expires.
Appraisals for Duplexes, Condos, and Rental Properties
Property type changes the paperwork. A two-to-four-unit building is reported on Form 1025 with an attached rent schedule, and the appraiser weighs both the sales comparison and income approaches to value. Expect a higher fee and a longer turnaround, since the appraiser has to verify market rents and review leases. If you’re weighing a two-unit purchase, it helps to understand how the guidelines shift when there are two front doors before you write the offer.
Condos get their own layer of review. The unit itself is appraised, but the lender also evaluates the project through a condo questionnaire covering occupancy rates, budget reserves, litigation, and the percentage of non-owner-occupied units. A project that fails those tests is non-warrantable, and no appraisal will fix that.
For a rental purchase, the appraiser’s rent schedule often matters as much as the value. Lenders use those market rents to calculate income, and the qualifying math can be stricter than buyers expect. The real cost of the 25% down payment rule on investment properties is a useful reality check before you assume the numbers work.
How the Appraised Value Reshapes Your Loan
Your loan-to-value ratio is calculated using the lower of the purchase price or the appraised value. That single sentence explains most appraisal horror stories.
Say you agree to pay $420,000 with 5% down, and the appraisal comes back at $405,000. Your lender now treats $405,000 as the value, which means your $399,000 loan is suddenly 98.5% LTV, not 95%. You’d need roughly $21,000 down instead of $21,000 minus the gap, plus mortgage insurance priced off the higher ratio. Buyers putting 5% down feel this most sharply, and the true numbers behind a 5% down conventional loan are worth reviewing before you stretch on price. If a smaller down payment is part of your plan, this breakdown of how little you can actually put down on a conventional loan covers the trade-offs.
Getting Ready for the Appraiser’s Visit
You can’t influence the value, but you can make sure the appraiser has accurate information. First-time buyers in particular tend to leave money on the table by not documenting improvements. If you’re early in the process, this guide to what conventional loan guidelines require of first-time buyers pairs well with the checklist below.
- Write out a dated list of improvements with costs, and attach permits for the roof, addition, or finished basement.
- Leave clear access to the attic hatch, crawl space, electrical panel, water heater, and furnace.
- Confirm utilities are on. An appraiser can’t verify systems in a house with no power or water.
- Secure pets and clear a path through every room, including the garage.
- Hand over your HOA contact and any recent comparable sales you believe the appraiser should consider.
When the Appraisal Comes In Low
A low value is not the end of the deal. It’s a negotiation with four realistic exits. You can ask the seller to drop the price to the appraised amount, which happens more often than buyers expect in a cooling market. You can cover the gap in cash and keep the original terms. You can request a Reconsideration of Value through your lender, submitting three or more better-matched closed sales the appraiser may have missed; this works when there’s a genuine comp error, not when you simply disagree. Or you can exercise your appraisal contingency and walk, assuming your contract included one and the deadline hasn’t passed.
The worst outcome is discovering the gap after your financing contingency has expired. Read that date before you sign, keep a few thousand dollars of reserves unspoken for, and treat the appraisal for what it is: an independent opinion that protects the lender, but also protects you from overpaying for a house whose condition a professional just documented in writing.