Things to Consider When Scheduling an Appraisal
The appraisal is an important part of the lending process. The primary objective of an appraisal is to establish the estimated market value of real estate. Appraisals are necessary to determine the maximum amount that a lender is able to lend to prospective borrowers. While most borrowers are solely focused on “how much” their home is worth, lenders evaluate several pieces of information provided within an appraisal.
Three main factors to consider when dealing with appraisals are:
- What is the condition of the property
- Has the home recently been listed on the market
- Will any additional tests/inspections be required
All of these factors, as well as many others are considered when lenders evaluate appraisals. However, the primary focus has been on those three areas as they pertain to underwriting real estate property. The goal is to prepare borrowers on what to expect from the appraisal process, as well as how to get a home ready to appraise.
It is important to note that the requirements of an appraisal and an appraiser may vary depending on loan type. Generally speaking, the requirements or standards on a conventional appraisal are a little less extensive than that of an appraisal for a government loan (FHA or VA). While 90% of the appraisal process is the same regardless of loan type, a government loan may have additional regulations or standards that a conventional loan does not.
This is not to imply that qualifying for a government loan is harder than qualifying for a conventional loan. Differences will be pointed out (and in some cases, additional requirements) between conventional and government loans. Knowing what is required for each type of appraisal may prove helpful when determining the loan structure that is most appropriate for borrowers.
Having a well-maintained home that demonstrates pride of ownership can help strengthen a loan file. While the information provided is just a general overview, these are items that are encountered on a daily basis while reviewing loan packages. Knowing what appraisers and lenders are looking for as it pertains to real estate properties should prove helpful to navigate through the mortgage loan process. If a home falls into any of the three categories that have been described, be prepared to address these items. Being proactive when it comes to property maintenance and repairs may save time, money and possibly headaches while obtaining a home loan.
Written By: Neil Daily, Underwriter at Royal United Mortgage LLC