Appraiser's Role

Appraiser's role

When you take a mortgage to buy a house, the lender requires an appraisal -- a neutral expert's estimation of the home's fair market value. The appraiser considers many factors including, condition, size, location, and amenities of the property being appraised. He will then compare your property to the prices of comparable homes that have been sold in the area.

Lenders require this appraisal because it would be bad business to lend more than the house is worth. In the vast majority of cases, everything is fine: The house is appraised at or above the sale price and the loan goes through. However, on occasion, the appraisal comes in less than the home's selling price. What happens next depends upon the loan amount you are seeking and the lender's guidelines.

One factor that goes into your mortgage rate is your "loan to value". This number is expressed as a ratio of loan amount over property value. If you initially believed your home to be worth $200,000, and it only appraises for $180,000, your "loan to value" will increase. If the LTV (loan to value) increase too much, you may lose your loan approval, or you will need to put down a bigger down payment.

What to do if your appraisal comes in low?

In the case that your appraisal comes in low, you will first want to go back to the appraiser to reevaluate. Appraiser's are human, and can make errors. You will want to make sure they haven't missed any recent add-ons, the new swimming pool, etc. If everything looks correct you will need to go directly to the lender.

Many lender's have appraisal review boards that will audit an appraiser's work. They will review the comparable properties that were used, adjustments that were made, area sales history, current market conditions, etc. Be warned, that a review board is just as likely to cut the value as they are to increase it. Make sure you really have a case before you go this route.

As a last resort, you may want to have a 2nd appraisal done. Or you will want to take to your loan officer about changing your loan program. If you still need help, contact Allie Mae for advice.




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Ginnie Mae


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