Some government programs may not require an appraisal to finance a mortgage, but most regular lenders will base the amount of the loan that they will offer partly upon the value of the house. In addition, many lenders will offer better interest rates if they don’t have to lend more than 80 percent of the home’s market value. The way that this market value gets determined is with an appraisal, and these appraisals are very important for people who want to refinance.
What is a Home Appraisal?
In some cases, lenders may actually have to come out and look at the house before completing the home appraisal. This is just a non-intrusive visual inspection. During this visit, you could point out any upgrades that you think will make your house more valuable than other houses in the neighborhood.
Appraisers also base the home’s value upon sales of similar homes in a local area. They may look at houses that are of a similar size, age, and condition. This makes sense because the only real way to value a house is by comparing it to the market.
What if the Appraisal is Too Low?
You will probably be disappointed if your own home’s appraisal is a lot lower than you’d hoped. A low appraisal might hurt your chance of getting the best interest rates or even qualifying for certain loans at all.
You should know that you do have the right to challenge the appraiser’s figures. You can’t just contact the company and tell them that they’re wrong. You have to give them some reason to change their mind. For example, the appraiser might not have accounted for some upgrades that you think make your house more valuable than other homes that only seem similar. If you recently installed a new furnace, updated your kitchen, or replaced old carpet with ceramic tile, you should be sure and let the appraiser know about it.
If the appraiser still won’t budge, you still have options. You might even get anther appraiser to give a second opinion, but you will probably end up paying for this second appraiser too. Otherwise, you might have to find a lender that will qualify you with less home equity. If you owe more than your house is worth, you might ask a broker about a government program that can help you.
Who Can Help You Deal With an Appraiser?
An appraiser has to be independent and objective. After all, they answer to underwriters at loan companies and banks. Still, good mortgage brokers should have experience with the process and may offer tips to maximize your home’s market value. The broker should be on your side because it is in his or her best interest to find you a loan with terms you want to accept.