Contrary to popular belief, home appraisals and home inspections are not the same thing. They’re often confused, but they have differing primary goals in the homebuying process. An appraisal’s primary goal is to determine a home’s value, while an inspection evaluates a home’s condition. Both provide important information to buyers, but only home appraisals are required for loan approval.
Though appraisals are a key component of most home loans, they are subject to particular requirements depending on the loan type. Below, we’ll review how USDA appraisals differ from home inspections and what is required for USDA loan approval.
In a Nutshell
USDA loans require an appraisal by a USDA-approved appraiser to confirm the home’s value and ensure it meets basic safety and livability standards. Appraisers also verify that the property meets basic minimum property standards for safety and livability. While these standards help protect the buyer and lender, they do not replace the detailed evaluation provided by a professional home inspection, which is why inspections are strongly recommended.
USDA Appraisal vs. Home Inspection Cost
Home appraisals for USDA guarantee loans typically cost between $600 to $900, depending on your location, while home inspections vary from $300 to $500. Home appraisals and inspections are costs the homebuyer must cover. Thankfully, borrowers may be able to cover these costs with seller concessions or gift funds.
USDA Appraisal vs. Home Inspection Requirements
| USDA Appraisal | Home Inspection |
|---|---|
| Required for USDA loan approval | Not required, but strongly recommended |
| Ordered by the lender and paid for by the buyer | Chosen and paid for by the buyer |
| Conducted by a USDA-approved appraiser | Conducted by a licensed home inspector |
| Determines the home’s market value and confirms USDA eligibility | Evaluates the home’s overall condition and systems |
| Reviews the property for USDA minimum property standards | Provides a detailed, in-depth condition report |
| Protects the lender’s interest | Protects the buyer’s investment |
How USDA Appraisals Are Ordered
In most USDA loan transactions, the lender is responsible for ordering the appraisal, not the buyer or seller. This helps ensure the appraiser remains independent and meets USDA requirements. While the buyer typically pays the appraisal fee, the lender coordinates with the appraisal management company to handle scheduling.
The USDA appraisal is usually ordered after the home purchase contract is signed and the loan application is underway, but before final loan approval. The appraisal must be completed and reviewed before the loan can move forward, and any conditions or required repairs noted by the appraiser must be addressed prior to closing.
What if the Home Appraisal Fails?
A USDA appraisal can raise concerns for two main reasons: the home doesn’t appraise for the purchase price, or it doesn’t meet USDA minimum property standards. What happens next depends on the reason the appraisal failed.
If the Appraised Value Is Too Low
If the property appraises for less than the agreed-upon purchase price, you have several options:
Renegotiate the price with the seller to match the appraised value. A home inspection report can help support these negotiations.
Request a reconsideration of value, which allows you to review the appraisal, ask questions, and submit additional comparable sales if you believe the value is inaccurate.
Pay the difference between the appraised value and the purchase price out of pocket.
If the Property Doesn’t Meet USDA Minimum Property Standards
If the appraisal identifies issues that prevent the home from meeting USDA minimum property standards, such as safety hazards, structural concerns, or missing or nonfunctional utilities, the loan cannot move forward until those issues are resolved. In many cases:
Request that the seller complete required repairs before closing. If the seller agrees, the lender may require a follow-up inspection or appraisal to confirm that the repairs were completed.
If the repairs cannot be made, the buyer will likely need to walk away from the deal.
Neighborly Advice
It is also possible for the borrower to pay for and handle repairs themselves if the seller won’t. However, this can be risky. The borrower must coordinate with service providers and pay them, while the seller must grant access to the property for the repairs. If the buyer makes these repairs and is later denied the home loan, the seller isn’t required to pay for them unless a deal was negotiated to that effect.
Addressing these issues early can help avoid delays and ensure the property is eligible for USDA financing.
Do I Need a Home Inspection for a USDA Loan?
The USDA does not require home inspections for loan approval, but one is strongly recommended. Home inspections are sometimes confused with appraisals because USDA appraisers also review the property for basic safety, livability, and structural soundness, however, an appraisal is not designed to be a deep, diagnostic review of a home’s condition and cannot replace a professional home inspection.
A home inspection can uncover hidden or developing issues that an appraisal may not identify. These issues can be extremely costly to repair after closing, however, with an inspection report in hand, buyers may be able to negotiate repairs or a price adjustment with the seller, rather than absorbing those costs themselves.
FAQs About USDA Appraisals and Home Inspections
How long is a USDA appraisal good for?
USDA appraisals are initially valid for 180 days from the appraisal’s effective date. If the loan does not close within that timeframe, the lender may request a one-time Appraisal Update Report.
What is a USDA home appraisal update?
An appraisal update can extend the validity of the original appraisal for no more than 1 year from its original effective date, even if the appraisal has already expired when the update is requested. The purpose of an appraisal update is to confirm that the property has not declined in value since the original appraisal—it cannot be used to increase the appraised value.
If you want a home reassessed for value, a new appraisal must be conducted.
What does a home inspector check?
Inspectors provide a detailed review of the home’s overall condition, including roof, foundation, plumbing, electrical systems, HVAC, and potential safety issues.
Can an inspection help with negotiations?
Yes. If the inspection reveals problems, buyers and their agents can use the report to request repairs, negotiate the price, or ask for seller concessions.
What if the home inspection uncovers a major issue?
If a home inspection uncovers a major issue, such as a structural problem, safety hazard, or costly system failure, buyers typically have several options. Depending on the terms of the purchase agreement, you may be able to ask the seller to make repairs, request a price reduction or credit at closing, or negotiate other concessions. If the issue is significant and an agreement can’t be reached, buyers may also walk away from the contract without penalty. A home inspection provides the information needed to make an informed decision before moving forward.
How long is a home inspection good for?
Unlike an appraisal, a home inspection doesn’t have an official expiration date. However, an inspection only reflects the home's condition at the time it was performed. New issues can arise after the inspection, and existing problems can worsen over time, especially if repairs are delayed or the home remains vacant. For this reason, inspections are typically most useful when conducted shortly before closing, so buyers have the most accurate picture of the home’s condition.
Bottom Line
For buyers using a USDA loan, understanding this distinction can help prevent surprises, delays, or unexpected repair costs down the road. Even though an inspection isn’t required, it’s one of the best ways to protect your investment and gain peace of mind before closing. By pairing a USDA appraisal with a professional home inspection, buyers can move forward with confidence knowing both the value and condition of their future home are fully understood.
Emily Kittle is an experienced underwriter with a strong background in risk assessment, training, and loan decision-making. She excels at solving complex mortgage challenges and guiding loans to closing using creativity and critical thinking.
