When someone is thinking about buying a home, one of the key parts is the home appraisal. The appraisal ensures that the buyer is paying a fair price for the home while also protecting the mortgage lender against taking a loss.
Traditionally, mortgage lenders have required an appraisal to be conducted on a home before a sale goes through. That’s because lenders want to make sure that the home is worth what the buyer agreed to pay for it. Lenders in Seattle and Denver do not want to loan out more money for a home that might be worth less than it was purchased for, as it places them at risk should the buyer ever default on the mortgage.
Appraisals may also be required because of what is mandated by authorities like Freddie Mac, Fannie Mae, and the FHA, depending on whether any of these entities are backing a mortgage.
On the other hand, an appraisal is also an added cost of the buyer can be a serious source of stress for both sellers and brokers.
Recently, government agencies have passed a rule saying that home appraisals are no longer going to be required on homes that are less than $400,000; however, many lenders will still require them.
Therefore, when should someone consider skipping a home appraisal to save some money?
Appraisals And Mortgages
One of the first ways to take a look at the value of a home appraisal is by comparing it to the mortgage. The two go hand in hand. Appraisals are important because they protect not only the seller and buyer but also the lender. The lender wants to make sure they know what the property is worth.
Therefore, an appraisal is more about valuing the property and not about the price of the home in WA, OR, ID, or CO.
In addition, lenders make loans based on either the sale price or the appraised value, whichever is lower. Lenders do this to make sure that buyers have invested enough in their own property.
Borrowers And Appraisals
In addition to considering the lender, it is also important to consider the borrower. An appraisal is helpful for the borrower because this prevents someone from overpaying for a property.
As a buyer, you want to make sure you are not paying more for a home than it is worth. This is a huge investment, and as such, you want to protect it. Having an appraisal will help ensure the value is there when you finalize a deal with a seller. Therefore, they act as a form of consumer protection.
On the other hand, they also cost the borrower a few hundred dollars. More specifically, buyers can expect to pay anywhere from $250 to $500 on an appraisal, depending on how complex the property is. While lenders may require an appraisal to be conducted, the service is paid for by the borrower. If money is tight, this can be a serious problem and could dull the appeal of a home.
Don’t Confuse Appraisals With Inspections
As a buyer, you may want to have the home inspected by a professional home inspector before the deal is sealed. This will give you a chance to see if there are any issues with the property that may be a deal-breaker for you.
But doesn’t an appraiser basically do the same thing as a home inspector? Don’t the two involve checking out a property in detail?
No, a home inspection and an appraisal are two different things.
A home inspection is done to determine the condition of the property and involves inspection of all major systems, foundation, roof, and so forth. The inspection is done for the benefit of the buyer and gives important information regarding the condition of the home. They’re not required, but they are highly recommended, especially for older homes.
That way, you can back out of a deal instead of getting stuck with a home that will cost you thousands of dollars in repairs. Or, you can use the inspection report and go back to the negotiating table with the seller and request a reduced price.
The purpose of a home appraisal, on the other hand, is to determine the current market value of the home. For one, the outcome will ensure that the home loan is not any higher than the actual value of the home in Denver or Boise. It’s important to distinguish between home appraisals and home inspections.
Choosing Between The Two Options
In the end, people should consider skipping the appraisal if it saves them money. However, there will likely be cases where the lender will require an appraisal, and therefore it cannot be skipped. Lenders might still require someone to obtain an evaluation as a form of protection. If the buyer is not confident in this evaluation method, then a traditional evaluation might be a better approach.
It is important for people to feel confident in the sale price, regardless of how this happens.
Ready to Apply For a Home Loan?
Are you ready to make a home purchase and need a mortgage to finance it? Sammamish Mortgage can help. We are a local mortgage company serving the broader Pacific Northwest region, including Washington, Idaho, Colorado, and Oregon. We have been offering several mortgage programs and products with flexible qualification criteria since 1992. Please contact us if you have any questions or are ready to start the mortgage application process.