Mortgage Financing Appraisal
The home appraisal is a standard and essential step of the mortgage loan process. Most lenders that service mortgages will order an appraisal before approving the loan requested by the buyer. The appraisal is necessary for the lender to determine whether the value of the home matches the amount of the loan. It is a precautionary measure that protects both the lender and the borrower.
How Mortgage Financing Appraisals Work
Say you wanted to buy a house for $200,000. You have the cash for a down payment of 50,000 (25% of the home’s value) but need the bank to cover the rest. The mortgage loan you would be seeking, in this case, would be the other 75% of the home’s value, or $150,000. You would likely be pre-approved for this loan before making an offer on the home or signing a purchase agreement. Just because you have a pre-approval, though, doesn’t mean that the bank will just hand you a check as soon as you get everything squared away with the seller.
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One of the issues that need to be settled before the bank will give final approval on yourmortgage application is the value of the property. Just because someone lists a house at $200,000 doesn’t necessarily mean it is worth that. Market values in real estate are constantly luctuating, depending on the season, area, nearby developments, and more. With so many factors at play, it is difficult for even sellers and real estate agents to price homes in alignment with their true value. It is due to this fact that there tends to be so much negotiating on home purchase prices. For instance, on the $200,000 house, you might initially offer $185,000, get a counter offer of $195,000, and settle at $190,000.
An appraisal is the lender’s way of assessing the home’s fair market value and making sure that the buyer isn’t overpaying for the property. After all, if the buyer overpays, then he or she is taking a more significant risk on the purchase. That risk transfers over to the bank, which is putting up money that it may or may not be able to make back in the event of a foreclosure. Thus, an appraisal to verify the market value of the home is necessary to the mortgage loan process. If the appraised value of the property is considerably lower than the agreed-upon purchase price, the buyer can use that information to renegotiate with the seller or get out of the
To perform the appraisal, the bank will hire a third-party professional who is not connected to the buyer or the seller. This way, the appraiser will be well-positioned to provide a fair and objective study of the house. The appraiser will take multiple factors into account when establishing the property’s value. These will include the size and condition of the house, the size of the lot, and recent sales information for comparable homes in the same neighborhood or nearby. Drafty windows, cracks in the wall, and damaged siding are all examples of things that can lower a home’s appraisal value. A new roof, modern stainless-steel appliances, and well-cared-for landscaping, meanwhile, can increase a home’s value.
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Mortgage financing appraisals are just one type of service we offer at Authority Appraisals. For more information please Contact Us, if you are ready to get started please complete our Order an Appraisal form and we will be in touch with you a free appraisal quote.
Authority Appraisals also can offer professional Brokerage Services under our sister company Rhodes & Associates Realty. For more information on our Brokerage services please visit us on the web at www.Rhodes-Associates.com
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