What changed in FHA appraisal rules in 2025 and 2026?

June 2025: HUD trimmed the appraisal checklist

On June 27, 2025, HUD issued Mortgagee Letter 2025-18, effective immediately for FHA forward loans and HECM reverse mortgages. The stated goal was to remove requirements that went beyond industry standards. Here is what changed:

• Photos. HUD removed photo requirements that exceed industry standards. Attic and crawl space photos are no longer required. Basement photos still are. HUD also dropped the opposite-angle rule for front and rear shots, the side-angle rule for comparable photos, condo common-area photos, and hallway, foyer and laundry photos for 2 to 4 unit homes. The street scene and front and rear photos are still required.
• Remaining economic life. Appraisers no longer have to report it, and underwriters no longer compare it to the loan term. Effective age is still reported.
• Market conditions comps. HUD removed what it called the redundant requirement for extra comparable sales and listings in changing markets. Reporting market trends stays.
• Section 223(e). The extra appraisal and underwriting rules for 223(e) mortgages were removed.

For appraisers, this was a rare week when the paperwork got lighter. Somewhere, a flashlight and a crawl space breathed a sigh of relief.

What the 2025 change did not do

It's easy to read "fewer photos" and assume the appraiser stopped looking. That's not what HUD said.

Fewer required photos is not the same as fewer required observations. The FHA appraiser is still checking the home against HUD's standards for safety, security and soundness, and still calling for repairs when something fails. A soggy crawl space is still a problem. HUD just no longer requires a picture of it in every report.

ML 2025-18 also kept the rule that MLS records and property site visits alone are not acceptable verification sources. And it kept the neighborhood-first order for market analysis and the reporting of market trends.

USDA followed along. In its July 2025 appraisal training, USDA said FHA had removed the attic and crawl space photo requirement, that its own handbook would be revised, and that it would accept appraisals without those photos in the meantime.

Also in June 2025, HUD's Mortgagee Letter 2025-19 replaced mandatory damage inspections in presidentially declared disaster areas with a risk-based approach left to the lender. If repairs are needed, they must be done before endorsement unless the home is livable and a repair escrow is set up.

September 2026: a draft rewrite of FHA property standards

On September 22, 2026, HUD posted proposed revisions to Handbook 4000.1 on its Single Family Drafting Table. Based on McKissock's summary, the draft would:

• Replace "minimum property requirements" and "minimum property standards" with one framework called Property Acceptability Criteria.
• Make the standard UAD condition ratings (C1 to C6) and quality ratings (Q1 to Q6) the FHA baseline, as an absolute rating of the property, not a comparison to the neighborhood.
• Make homes rated C5, C6 or Q6 ineligible unless every deficiency is cured before closing.
• Limit required repairs to items affecting safety, security, soundness, marketability or the health of the occupants. Cosmetic and minor deferred maintenance would be noted, not required.
• Drop the requirement to operate appliances, and drop the roof inspection condition for roofs with less than two years of life left.
• Remove standalone sections on meth-contaminated properties and some attic observation steps, and apply lead paint rules to the dwelling only.

Comments are due November 6, 2026.

Draft is not final, and here is why that matters

McKissock is clear that these are proposed revisions, they have not been adopted, and adoption is not guaranteed. Drafts change. Sometimes a lot.

So for now, the current Handbook 4000.1 rules (as changed by ML 2025-18) are the rules. If someone tells a seller "FHA doesn't check the roof anymore," that person is reading tomorrow's newspaper today, and tomorrow hasn't approved it yet.

From my seat, the most interesting part of the draft is the shift toward C1 to C6 ratings as the gate. That is the same condition language conventional appraisals already use. If it's adopted, the question "is this house FHA-eligible?" starts to sound a lot like "what condition is this house in, really?"

That's a question the market already answers every day. In the markets I work, buyers react to condition more than age. A C5 house sells to a different buyer pool, at a different price, than a C3 house next door. A rule built on condition would line up FHA eligibility with how buyers already think.

What loan officers and agents should do now

1. Use the current rules. Handbook 4000.1 plus ML 2025-18 and ML 2025-19 is what governs today.
2. Stop asking for attic and crawl space photos as an FHA requirement. They're no longer required. An appraiser may still note what they saw.
3. Still prep the property. Peeling paint on older homes, missing handrails and leaky roofs still get flagged under today's rules.
4. Read the draft if you work FHA files, and send comments to HUD by November 6, 2026 if you have a view.
5. Watch for the final version. When HUD adopts something, it will come with an effective date. Until then, don't market the draft to clients as the law.
6. Learn the condition ratings. C1 to C6 already matters on conventional loans, and the draft suggests it may matter on FHA too.

Rules change. The house doesn't care. Fix the handrail.