In many cases, lenders require a professional, independent appraisal of the property you want to buy or refinance. This ensures the value of the house and the property itself meets the requirements of the loan guidelines. If you are making a smaller down payment and have a lower credit score, the lender is going to be even more interested in making sure the property that will be collateral for the loan is worth lending the amount requested.
A professional, independent appraiser will usually visit your home and inspect its interior and exterior. The appraiser doesn’t want to buy your home, and isn’t a visiting head of state. So its imperative you do not postpone the appraisal until you get a chance to “clean up a little.” Cleaning does not make your appraised value higher! And delaying adds time to an already lengthy process.
The appraiser will form an opinion on the probable market value of the property considering sales of similar homes in the area along with many other factors. He or she will prepare an appraisal report explaining the conclusion. The appraisal belongs to the lender that has originated the loan that uses the home as collateral. At First Heritage Mortgage, we always provide our clients with a copy of the appraisal during the loan process or at closing.
The lender uses the appraisal to certify whether the property is worth at least as much as the loan amount. In the unlikely event the lender would have to foreclose, it wants to know it will be able to recoup at least the loan amount in the event the home is sold. Should the appraised value be less than the contract price of the home, additional down-payment may be required in the deal or the contract may need to be re-worked. Consult with your realtor if this happens since the language in the contract specifically addresses this.
An appraisal can cost from $400 to $550 or more for complex properties, properties over $1 million and investment properties.