If you plan on purchasing a new home with a mortgage or refinancing your current loan (or even getting a reverse mortgage), you will most likely need to order a mortgage appraisal. It might also be required for a home equity loan. This is a comprehensive report that determines the value of your property based on a number of factors, ranging from gross living space, to the view and the year a property was built.
Typically, a bank or mortgage broker will handle this for you, but you will still have to foot the bill unless the cost is built into your mortgage rate.
What is a Mortgage Appraisal?
A mortgage appraisal is an estimate of a property’s value. Mortgage lenders require an appraisal on your home before they’ll provide a loan for the simple reason that the property is the underlying asset that serves as collateral for the loan. It is an unbiased estimate of the true (or fair market) value of what a home is worth. All lenders order an appraisal during the mortgage loan process so that there is an objective way to assess the home’s market value and ensure that the amount of money requested by the borrower is appropriate.
Multi-unit properties and properties in rural areas will usually cost more to be appraised than a single-family residence in a densely populated area. Traditionally, a condo appraisal will generally cost the same as a single-family home appraisal, even if the condo is much smaller. This could be because appraisers must still assess the entire building/complex, which can be time consuming as well.
Typically, a mortgage appraisal happens after your ‘offer’ has been accepted by the seller, when a lender is determining ‘how much’ money they will finance toward your mortgage. Whereas, other types of home appraisals can occur after a property has been bought, or for another reason (like planning an estate, or securing a bail bond) when the property is not necessarily being sold.
Your lender orders the appraisal to be performed by a licensed appraisal expert, like Hudson View. However, you, the borrower, are typically required to pay for it. The cost appears on the Closing Disclosure as part of your closing costs.
For the most part, this is a hands-off process for both the buyer and seller. The homeowner will give our Expert appraiser access to the home to perform the evaluation. Aside from that, the buyer and seller do not really need to be involved in the appraisal process at all. It’s the bank or mortgage lender that orders it, because it protects their interests.
Lenders want to make sure that homeowners are not overborrowing for a property because the home serves as collateral for the mortgage. If the borrower should default on the mortgage and go into foreclosure, the lender will recoup the money it lent by selling the home. The mortgage appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.
If you would like to learn more, please visit the FAQs section, or contact us today to Get Started. Or visit us on LinkedIn. Use our services for managing your appraisal needs in the New York & Connecticut areas.
Hudson View Appraisal Services has many years of experience in the business, we have a proven track record of reducing lenders aggravations, efforts, and costs in managing the appraisal process.