The Home Appraisal Process
You may be wondering, how is an appraisal and appraiser scheduled? While you as the borrower are typically responsible for paying the appraisal fee, the lender typically orders the appraisal on your property – alleviating the legwork in that regard on your end.
For your home appraisal, a qualified appraiser is assigned to your property. The appraiser selects recent home sales of comparable size, utility, condition, and location. While the appraiser determines your home’s worth based on a thorough evaluation of the interior, and exterior of the property, taking note of the square footage, number of bedrooms and bathrooms, any value-boosting features, repairs needed, and more, many borrowers aren’t aware that the appraisal is also determined by sales comparison and current market trends.
The Appraisal Report
An Appraisal Report is a detailed document including observations made by the appraiser to determine the home’s value. Many appraisers follow Fannie Mae’s Uniform Residential Appraisal Report for single-family homes.
So, what’s in an appraisal report?
- Square footage details
- Photos of the property and its surroundings
- A map of the property’s street
- Comparable sales (with photos)
- A sketch of the home
- Condition of the plumbing, electrical, and HVAC systems
- Public land and tax records
- And more!
It’s important to note that depending on the appraiser, and sometimes loan type, the appraisal and process may look a little different. Generally, though, the reports are similar in their conclusions.
Home Purchase Appraisal vs Refinance Appraisal
Whether you’re purchasing or refinancing a home, an appraisal is a huge determining factor when it comes to the amount borrowed. For instance, when you’re purchasing a home, if the home appraisal comes in at a lower value than the purchase price of the home, a lender typically won’t lend a higher mortgage amount than what the home is appraised for. The same goes for refinance appraisals.
For refinances, an appraisal is crucial for lenders because it shows how much money home equity a borrower can borrow against. If the current value of your home is less than the original loan’s principal (meaning you’re underwater on the mortgage and owe more on the home than it’s worth), refinancing is not typically an option. Additionally, if the equity in a home is less than 20%, lenders generally require the borrower to pay for private mortgage insurance (PMI) and/or offer less competitive interest rates.
