Refinancing your mortgage is an exciting step toward better financial health. But before you can bask in the benefits of a new loan, there's one crucial hurdle: the home appraisal. Don't worry, though—we've got you covered with everything you need to know to ace this part of the process.
Think of a refinance appraisal as a check-up for your home. When you're refinancing, your lender wants to make sure your house is worth enough to back the new loan. An appraiser comes in, evaluates your property, and compares it to similar homes in your area. It's like when you first bought your house.
1. Confirming Home Value: It important to know your home's current market value to ensure they don't lend more than it's worth. If you can't repay the loan, they need to be sure they can recover their money by selling the house.
2. Cash-Out Refinances: If you're looking to pull out some equity (a cash-out refinance), the appraisal determines how much equity you actually have. Your equity is the current home value minus any mortgage balance.
3. Property Condition: The appraisal gives a snapshot of how well you've maintained your home and how it stacks up against similar properties in your neighborhood.
Here's some good news: not every refinance requires an appraisal. Certain programs, like FHA streamline refinances and VA Interest Rate Reduction Refinance Loans (IRRRL), often skip this step if you meet specific criteria. These streamlined programs focus on getting you better loan terms or lower interest rates without the hassle of a new appraisal.
Appraisers are like detectives for your home’s value. They focus on:
- Location: Proximity to parks, schools, and other amenities matters a lot. They’ll compare recent sale prices of similar homes nearby.
- Size: The square footage and the number of bedrooms and bathrooms are key factors.
- Layout and Functionality: Modern, functional layouts can boost your home’s value.
- Home Improvements: Renovations, especially in kitchens and bathrooms, or upgrades like a new roof, can positively impact your appraisal.
- Exterior Amenities: Decks, porches, and garages are pluses.
- Condition of Home Systems: The state of your plumbing, HVAC, and electrical systems will be evaluated.
Both types of appraisals follow similar methods, but there’s a twist. Purchase appraisers have the sales contract as a benchmark, making their job a bit easier. Refinance appraisers, however, rely solely on the property and comparables, often resulting in a more flexible and dynamic process. Plus, during a refinance appraisal, you can point out any upgrades since you bought the place, potentially increasing its value.
If an in-person visit isn't ideal, there are other options:
- Desktop Appraisal: Conducted remotely using online resources and property records.
- Hybrid Appraisal: A mix of in-person and desktop methods.
- Drive-By Appraisal: Evaluates just the exterior, often used for FHA or VA refinances and was popular during the COVID-19 pandemic.
Want to score high on your appraisal? Here are some tips:
- Clean and Declutter: A tidy, well-maintained home makes a great impression.
- Enhance Lighting: Open window shades and turn on lights to brighten up your space.
- Adjust the Temperature: Make sure your home is comfortably warm or cool.
Expect to pay between $313 and $500 for a refinance appraisal. The cost can vary based on your home's size and location. Usually, this fee is included in your closing costs and can often be rolled into the loan, so no need to pay upfront.
A low appraisal can be a bummer, but it’s not the end of the world. Here’s what you can do:
- Review the Report: Check for any errors or omissions.
- Challenge the Appraisal: Provide evidence that supports a higher valuation.
- Request a Second Opinion: Some lenders allow you to get another appraisal.
- Adjust Your Strategy: Consider a cash-out refinance or agree to PMI if necessary.
Understanding and preparing for the refinance appraisal process can turn a daunting task into a manageable step toward achieving your financial goals. With the right knowledge and a bit of prep work, you’ll be ready to rock that appraisal and enjoy the benefits of a successful refinance!
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 852144
www.nmlsconsumeraccess.org
100 Sun Ave NE Suite 650
Albuquerque, NM 87109
Phone: (208) 571-9705
burx@edgehomefinance.com
Powered By LenderHomePage.com
Edge Home Finance strives to ensure that its services are accessible to people with disabilities. Edge Home Finance has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.
Edge Home Finance makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows burxnorrod.com to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).
Edge Home Finance accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.
Edge Home Finance continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.
Despite our efforts to make all pages and content on Edge Home Finance website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.
If you are experiencing difficulty with any content on Edge Home Finance website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.
If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: burx@edgehomefinance.com