Home appraisals are done whenever you obtain a mortgage to purchase a home or refinance your home loan. Banks and lending institutions require a home appraisal when they provide financing for a home purchaser.
The fee for an appraisal of a home is usually between $200 and $300, although you can find banks that give a free home appraisal that will be included in a “no closing costs” loan.
Home Appraisals
During the process of purchasing a home or refinancing a mortgage, a home appraiser will look at the property’s condition and recently sold homes in the area to come up with the home’s appraised value. The value can determine whether or not you are given a home loan. Most banks will not lend more than 80 percent of the value of a home - this is called the “loan-to-value ratio.”
When doing a mortgage refinancing, the value of your home may come in less than you expected and perhaps less than the prior appraisal when you purchased the home or last refinanced. You might not even be able to refinance your loan because of the deceased value.
Example: You purchased your home three years ago at $425,000 with a 20 percent down payment, so your mortgage was $340,000. Fast forward to today, you want to refinance your loan, an apprisal is done and the value of your home is now only $380,000 and your current mortgage principal balance is $335,000. The LTV is 88.15 percent and chances are your lender will not refinance your mortgage.
However, you might still be able to refinance your home loan under the Making Home Affordable program if your loan is being held by Freddie Mac or Fannie Mae or has been securitized by either Freddie or Fannie.
When your bank, credit union or lending institution does an apprisal, ask for a copy of the apprisal - they are requied to give you one. Check the appraisal and make sure all the information is accurate and complete. Any improvements you fail to mention will not be included in the overall value of your property.
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