All About Appraisals
Appraisals are an important part of applying for a mortgage, refinancing loan, or home equity loan or line of credit. Here's what appraisals are and what to expect.
If you are applying for a mortgage, refinancing your home, or taking out a home equity loan or home equity line of credit, one of the first steps in the application process is getting an appraisal for your home. An "appraisal" is an estimate of how much your home is worth made by a licensed professional appraiser.
Appraisals vs. Assessments vs. Home Inspections
You may have heard the terms "appraisal," "assessment," and "home inspection" before, and you may know that they have something to do with your home's value or condition. An "assessment" is used by your local government to figure your property taxes. An "appraisal" is used by you and your lender to determine how much you can borrow for a mortgage, how much you can refinance your mortgage for, or how much equity you have in your home to borrow against.
While appraisals and home inspections both involve looking at the condition of your home, a home inspection's goal is to find any problems with your home, such as a leaky roof. You may also need a home inspection as part of the application process.
What Affects the Value of Your Home?
Key factors affect the value of your home:
· The age or condition of your home
· How much it would cost to build another home like yours
· Any special features or enhancements
· What other homes in your neighborhood are worth
· What other homes in your neighborhood are selling for
How Do I Get Started?
Your lender will typically choose or recommend an appraiser. You may be able to use an appraiser that you choose, but check with your lender first. A fee for the appraisal is part of the fees involved in home loans. A typical appraisal costs between $200 and $400.
Getting ready for an appraisal is a lot like getting ready to sell your home. Now is a good time to take care of basic maintenance, like yard work and other steps to improve your home's "curb appeal." Let your appraiser know about any home improvements, like new windows. It's also a good idea to get an idea of how much other homes in your neighborhood are selling for. You can get this information from a real estate professional.
What If The Appraisal Is Lower Than I Expected?
If your appraisal is lower than you expected, you may be able to negotiate with your lender or get a second opinion from another appraiser. Talk to a real estate professional to find out what your options are and which option is best for you.
What Else Should I Know?
Your lender may be required to give you a copy of the appraisal report if you ask for it. Make sure you get any promises or details about your appraisal in writing. Also, ask a real estate, legal, or financial expert to help you understand anything that isn't clear, and avoid agreeing to anything you don't understand.
These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action.
