When you are refinancing your current house or shopping for a new home, an inspection and appraisal will be part of the mortgage process.
Most lenders require an appraiser to visit a house to determine its value before giving its buyer a loan. The appraisal may change the size of the mortgage a lender will provide.
If you wish to buy a new house, hiring a qualified home inspector to examine the home’s overall condition is also necessary. Depending on the results of a home inspection
Here’s what you need to know about how appraisals and home inspections can affect your loan.
1. Appraisals Determine Value
Before deciding what size loan to give you, your lender will probably want to determine the value of your home first.
Appraisals are not just beneficial for the lender but also for the buyer. When you know exactly how much a home that you want to buy is worth, you can avoid overpaying.
Licensed appraisers conduct home appraisals by comparing a house with the value of other homes in the area. Appraisers also examine the interior and exterior of the home in person to assess its condition and take note of any amenities that may contribute to its value.
Your lender will choose the appraiser, although you will generally be responsible for the fee, which costs at least $300 or more.
2. Low Appraisals May Harm Your Loan
Even if you have preapproval for a mortgage loan, the home appraisal may change how much your lender will give you.
An appraisal that is higher than the sale price is not an issue. However, if the home appraisal turns out to be low, the mortgage lender will reduce the size of your loan or may even refuse to finance a mortgage if the seller doesn’t agree to lower the asking price.
In some cases, you may be able to dispute a low appraisal. If you decide to challenge a low home appraisal, you must present evidence that the appraiser’s assessment is inaccurate.
Reasons that could back up your appeal include proof of valuable features such as suites or pools and recent renovations that the appraiser missed while assessing the property.
If the appraiser is not familiar enough with the area, this could also help your dispute. However, if an appeal fails, you may have to increase your down payment if you still want the house.
3. Home Inspections Uncover Hidden Problems
While an appraiser’s job is to determine the fair market value of a house, an inspector’s task is to reveal any costly problems and damage.
There’s nothing worse than buying a house and discovering that it has an inconvenient and expensive issue, such as plumbing failure.
Home inspection is a step that you should never skip when purchasing a home. Serious plumbing, water damage, mold problems, and roofing issues that lurk in a home are not obvious to the average person.
You can find a reputable home inspector yourself or ask your real estate agent for a suggestion. Licensed home inspectors take a deeper look at a house’s condition than an appraiser does. Skilled inspectors will check the home’s sewer, water, electric system, ventilation, and HVAC.
4. Inspections Can Save You Money
To make sure your dream home isn’t actually a nightmare, be sure to hire an experienced home inspector. The $200 to $500 fee is more than worth it.
If the home inspection uncovers issues that aren’t bad enough for you to cancel your contract entirely, you may be able to negotiate with the seller to solve any problems. Damage can be a reason for the seller to reduce the home’s price or pay for repairs before you buy it.
If the house turns out to have more safety hazards or damage than you would prefer to deal with, you may want to back out of the deal before it’s too late and find a safer, lower-maintenance home.
Home appraisals and inspections are pivotal parts of the closing process when you are looking into a home. Appraisals also affect mortgage refinancing if you are considering a new or better mortgage payment plan for your house.
Knowing what to expect from home inspections and appraisals will help you take the right actions if you encounter any challenges along the way.
At Supreme Lending, we can help you refinance your home or get a loan for a new purchase.
Are you ready to take the next step in your home buying journey? Begin your loan application with us today.