The Age of 2 Real Estate Appraisals
As home values all over the country flounder, mortgage companies need to be reassured that the properties they’re lending money for are truly worth the risk. That’s why lenders require real estate appraisals. And now, sometimes even two separate real estate appraisals by two different appraisers.
It’s common, even likely, for a home to be appraised at a value under what a homeowner might think their home is worth. Real estate appraisals demonstrate approximate fair market value based on recent sales in your neighborhood. If homes in your area have foreclosed, they’re likely being sold at a greatly reduced price which, in turn, affects the value of your home and your real estate appraisal.
What Happens When a Real Estate Appraisal Comes in Lower Than You Expect?
When real estate appraisals come in low, it can restrict the type of loan a homeowner would qualify for, even meaning a higher mortgage rate. Mortgage rates are based on risk; if a home appraisal is lower than expected, the risk is increased.
Even the secure, government-insured FHA is attaching new rules to appraisals to protect their mortgage investments. Beginning on January 1, 2009, two appraisals are required for every FHA cash-out refinance with a loan-to-value over 85%. Two quick mortgage definitions here: cash-out refinance means you received cash back at closing or have consolidated debts into your mortgage. Loan-to-value is your new loan divided by your home’s new appraised value.
More Than One Real Estate Appraisal May Become More Common
So, be prepared for this if you are refinancing – your lender may require more than one appraisal. It might cost a couple hundred dollars extra now, but in insures your investment in your home and your lender’s investment in giving you a mortgage – two moves than can save hundreds of thousands over the term of your new mortgage.
To find out more about real estate home appraisals, check out Quicken Loans You Tube series on home appraisals.
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