Mortgage Lending Library
Many home buyers and loan applicants overlook the importance of appraisals. are essentially an assessment of a property in order to determine the property value. If you are applying for any sort of loan – including a debt consolidation loan, a new home loan, a second mortgage, or a home equity loan – appraisals may affect your loan application more than you realize. Lenders use appraisals to determine how much a property is worth before lending any money. For example, if you apply for a home equity line of credit or a debt consolidation loan, the lender will use an appraisal to learn how much your home is worth and so how much equity is left in the property. If you are applying for a new home loan or second mortgage, lenders will look to appraisals to determine whether you are not asking for more than the home is worth. Generally, lenders want to see some equity in a property to protect their interests. If you agree to pay $120 000 for a home but appraisals reveal that the property is worth only $80 000, lenders will know that is a bad risk. If you want to mortgage 80% or more of your home’s value, lenders may also need to charge you additional private mortgage insurance in order to protect their interests. For home loan applicants, too, appraisals are very important. If appraisals have revealed that you are buying a home with sizeable equity (you are buying a $120 000 home for $80 000, for example) you can use this fact in negotiating for a better rate. Also, if the lenders are using appraisals to determine your rates and loans, shouldn’t you run your own appraisals to make sure that you know what lenders are thinking? can also help you negotiate a better price for the property you are buying. If a seller wants more than the home is worth, you can use professional appraisals to argue your case. Further, if appraisals reveal liabilities that lower the value of the home, you can ask for the price of the property to be adjusted to account for the fact that you may need to repair or address these liabilities. can help you avoid costly mistakes in the home market – you do not want to pay more than a home is worth.