Is a Home Inspection Required When Using a Mortgage Loan?

The 2024 FHA Loan Handbook

The five most important points to take away from this guide:

  1. Home inspections usually aren’t required for a mortgage loan.
  2. They’re optional, meaning it’s up to the buyer to request one (and pay for it).
  3. An inspection can provide valuable insight into a property’s true condition.
  4. Home appraisals, however, are required for nearly all mortgage loans.
  5. FHA and VA appraisals include a basic property review, making them unique.

When buying a house, you’re not required to have a home inspection. It’s entirely optional, even if you’re using a mortgage loan to finance your purchase.

But you could benefit from having the home inspected prior to purchasing it. This process will help you understand what kind of condition the property is in, including any potential repair items.


Overview of home inspections

FHA and VA loans work a little differently. Technically, neither the FHA nor VA requires a standard home inspection. But they both require an appraisal, which includes a property evaluation for health and safety.

With a conventional loan, on the other hand, all inspections are optional.

Definition of a Home Inspection

First-time buyers often think that home inspections and appraisals are the same thing. But in reality, they serve two very different purposes and for two different “audiences.”

Here are the key differences between them:

Inspection: A thorough examination of a property’s physical condition. The inspector will check the structure, systems, and components of the home, including the roof, foundation, plumbing, electrical systems, heating and cooling, etc. The goal is to identify existing or potential issues and report them to the buyer.

Appraisal: An assessment of a property’s current market value. The appraiser will evaluate factors such as the size, condition and location, comparing the target house to comparable sales within the same area. The goal is to determine the home’s fair market value and report it back to the lender.

Mortgage Lenders Generally Don’t Require Them

When buying a house, you will have an opportunity to have the home thoroughly inspected before proceeding with the transaction. This inspection is entirely for the buyer’s benefit.

It is designed to give you a clearer and more detailed picture of the property’s overall condition. So you can think of it as form of due diligence, prior to making a major purchase.

Home inspections can also help you identify potential safety hazards in a property, such as faulty wiring, overloaded circuits, fire hazards and more.

But mortgage lenders typically do not require home inspections. It’s an optional process that you can decide on for yourself, as the buyer. And this guide will help you make an informed decision.

The FHA and VA Loan Process Works Differently

The home appraisal process for FHA and VA loans is a little different, when compared to a conventional or “regular” mortgage loan. The Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) do not require borrowers to have a home inspection. But they do require appraisals.

  • With a regular mortgage loan (one that is not backed by the government), the home appraisal determines the current market value of the property. That is its sole purpose.
  • But with a government-backed mortgage program, like FHA and VA, the appraiser must also review the property to ensure it meets the agency’s minimum property requirements.

Here’s how the Department of Veterans Affairs explains the difference, in VA Pamphlet 26-7:

“While VA-assigned fee appraisers must note any readily apparent repairs that are needed, it is important to distinguish the differences between a real estate appraisal and a home inspection report. The fee appraiser will not perform operational checks of mechanical systems or appliances.”

And here’s how HUD explains it with regard to FHA loans:

“An appraisal will be performed to estimate the value of the property, but this appraisal does not guarantee that the house is free of defects. You should inspect the property yourself very carefully or hire a professional inspection service to inspect the property for you.”

The takeaway: A standard home inspection is not required for FHA or VA mortgage loans. But both agencies do require an appraisal to determine the market value, and there’s a basic property review built into that process.

What the Inspector Does, and Why It’s Important

A home inspection is not intended to “make or break” the real estate transaction. Instead, it’s designed to inform the potential buyer about any property defects, problems, or issues that might not be obvious at first glance.

Home inspection being performed

A good home inspector will thoroughly examine the property from top to bottom. In many cases, this means climbing up on a ladder, crawling into the crawlspace, testing the installed systems, etc.

According to the California Real Estate Inspection Association:

“A complete inspection includes a visual examination of the building from top to bottom. The inspector evaluates and reports the condition of the structure, roof, foundation, drainage, plumbing, heating system, central air-conditioning system, visible insulation, walls, windows, and doors.”

After reading this, you can probably see the value of this process. While a home inspection might not be required for your mortgage program, it’s still a wise (and relatively small) investment. It gives you a clearer picture of the property’s true condition.

The takeaway: Nearly every buyer can benefit from having a complete home inspection, even though they’re typically optional.

Pros and Cons of Waiving the Inspection

Some buyers choose to waive (or skip) the inspection process altogether, in order to make their purchase offers more attractive to the seller.

This is a common strategy in a hot real estate market, where house hunters have to compete fiercely for limited inventory. Buyers might also waive other contract contingencies, such as the appraisal or financing contingency.

Waiving a home inspection (or other contingencies) might strengthen your offer in the eyes of the seller. But it brings some potential downsides for you, as the buyer.

If you discover a serious problem with the house after you’ve closed on it, you’re stuck with it. In contrast, if you’d had the home inspected before closing, you probably would’ve known about the issue — and had a chance to back out of the transaction.

Good Reasons to Have the Home Inspected

While a home inspection is typically not required, it does offer a number of important benefits for the buyer. Here are some of the reasons why you might want to consider having a property inspected, prior to sealing the deal:

  • Identifying problems. A property inspection can help you identify serious problems with the property, including structural problems, electrical issues, potential hazards, plumbing problems, and much more. These are obviously things you want to know about before buying a house.
  • Peace of mind. When you have a house thoroughly inspected, you can proceed with the sale knowing there probably won’t be any unpleasant surprises after you close. And you can’t put a price tag on that kind of peace of mind.
  • Bargaining power. If the home inspector identifies serious issues with the property you’re considering, you might be able to negotiate a reduction in the sale price, or have the seller repair the problem.
  • Maintenance planning. An inspection could help you plan for future maintenance or repairs, allowing you to budget accordingly and address issues before they become major problems.

When you weigh all of these benefits against the relatively modest price of a home inspection, you can see the value of having one.

Using a Contingency to Back Out of the Deal

Let’s assume that you choose to have a home inspection, even though it’s not required by your mortgage lender. Let’s further assume that the inspector discovers a serious issue you’re not comfortable taking on (like asbestos or structural issues).

What are your options then? Can you back out of the deal?

If you include an inspection contingency within your purchase contract, you should have the option to back out of the sale based on the inspector’s findings. Just make sure you understand the wording of the contingency clause, along with the timeframe it specifies.

According to the legal advice website NOLO.com:

“One of the best things about the home inspection contingency in a purchase contract is that, in most contracts, it is a highly subjective contingency. In other words, the buyer most likely has the option to back out of the contract prior to the inspection deadline for nearly any reason: the house smells funny, it turns out that there isn’t a sprinkler system, or the buyer just feels the house has bad juju.”

But you’ll only gain this kind of protection if you (A) have the home inspected and (B) add a contingency clause to your purchase agreement. This is why many buyers have an inspection performed soon after the seller accepts their offer. If there are problems with the house, you want to know as soon as possible.

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Brandon Cornett

Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author