Home Mortgage Appraisal Process

The appraisal assures your lender that the home you’re buying is worth at least as much as you’re paying for it. – (Not needed in Homepath Mortgage Loans)

A home appraisal is an estimate of value by a professional, licensed appraiser. The lender giving you the mortgage will order the appraisal and the appraiser will go visit the house you are buying.  They will compare its features to other similar homes and come up with a value.

The appraisal is for your lender, not you.  Lenders need to know a home is worth more than they are lending.

Lenders will give you a mortgage based on the lower of the purchase price or the appraised value.  If the home appraises for, say, $10,000 more than the purchase price, buyers often ask if they can borrow that amount for fix ups or closing costs.  The answer is no.  Mostly.  There are a few specific “rehab” or “fixer” loans that are designed for you to be able to borrow fix up costs.

Buyers paying all cash typically do not get an appraisal since lenders are the ones who require appraisals.

Appraisals can be for Conventional, FHA, or VA financing.  FHA and VA appraisals can be more particular about the condition of the house, not just its value.  The government is backing these loans and they don’t want you to have a lot of fixup expenses that could cause you to miss making your loan payments.  Things they would want fixed would be a lot of peeling paint, safety concerns, a roof in poor condition, serious repairs and rotten wood.

If the appraisal is higher than the purchase price, lenders won’t lend you the difference for closing costs or down payment.