How does an appraisal affect my mortgage?

If you are in the process of buying a home, getting a home appraisal of the property can help you to get the correct market value for the home so that you don’t pay too much for it. Getting a purchase appraisal while you are in the process of buying can affect both the overall cost of the house and the amount of your mortgage. It can be helpful for both the buyer and the seller of the property when the true value of the home is assessed.

Home Appraisals

Getting a home appraisal is a good way of getting the fair market value of a home. This will be based on the home’s condition, location, and the recent sale prices of home in the area that are similar to it. The appraisal gives you an estimate of the worth of the property, but it also determines how much a mortgage lender will allow you to borrow for the home.

When a home appraisal is done, it is performed by an appraiser. An appraiser has a lot of experience with appraising properties, and they have a license to do so. The appraiser who inspects the home can let you, the property owner, and the lender know exactly what it’s worth.

There are several factors that an appraiser uses to determine the value of a home. They always come in to view the home to make the assessment. A big factor is recent sales in the area that are comparable to this home.

Another factor is the condition of the construction of the home and its special features and amenities. The size of the property will also be assessed, as will any improvements made to the structure such as remodeling or additions that were added to the home.

The Appraisal and the Mortgage

The amount that is determined by the appraisal will have a direct effect on how much money you can be loaned for the mortgage. The lender will offer the home loan based on the estimate that comes from the appraiser so that they know the home’s fair market value.

Getting an appraisal prevents the lender from giving you too much of a loan and putting out more money than the property is worth. Getting an appraisal also protects you because it keeps you from being able to borrow too much for the home and getting into debt for more than the home is actually worth.

There are some times that the appraisal is done and the resulting value of the home is less than its purchase price. This can be highly unexpected to both parties, but it’s a good idea to be prepared for this as a possible outcome of the appraisal. If this happens, it doesn’t mean that you can’t get a loan for the home. It just means that the loan you are able to get will be based on the appraisal.

Your Loan-to-Value Ratio

There is a ratio of loan-to-value that is agreed on in the loan contract. This ratio compares the value of the home with the loan that you will get. This ratio is a representation of the amount of the home that is covered by the loan. To understand this ratio, look at what happens when a home is appraised at exactly the same as the purchase price.

If the home that you want gets an appraisal of $100,000, and the price is $100,000, you can agree with the seller about the price. When you communicate with the lender, you let them know that you have a $20,000 down payment.

To get the ratio of loan to value, you would subtract the amount of the down payment from the price of the house. This would leave you with $80,000. Then, you will seek to borrow that $80,000. Then, you divide the amount of the loan by the property’s value, and you get .08. To get your loan-to-value number, you then multiply this by 100, and you get 80%.

If the appraisal of the home came in at less than $100,000, this would change that ratio and the amount that the lender would be willing to lend you. In that case, you would either have to come up with the difference between the two prices, or you would have to get the seller to lower the price to meet the appraisal amount.

It’s also possible for the appraisal to end up being more than the home’s purchase price. If this should occur, this is a positive situation for you. It just means that the agreed price of the home is less than its value on the market. This would not change the amount of your mortgage because the price of the home won’t go up to meet the value of the appraisal.

It’s common for the listing price to be a little different from the appraised price. However, it is only the appraised price that the lenders will go by when deciding how much they will lend you. If the appraisal does come back too low, the buyer can try to get the seller to change the price to reflect the appraisal, or they can walk away from the deal. Often, a seller will change the price of the home because they want it to be sold.

When you are in the market for a house and think you may have found the one, you will need a home appraisal to make sure of its value. At AmeriMac Appraisal, we can help you to get the appraisal you need to get a clear and fair market value for the property.