Health & Fitness
Ask a Mortgage Expert: Home Appraisals
Chip Poli, CEO of Poli Mortgage Group, Inc., explains what you need to know about home appraisals.
What is a Home Appraisal?
The Home Appraisal is a comprehensive, written report and a critical required component of almost all mortgage transactions completed by a professionally licensed and trained appraiser. The main reason for this mandatory step in the mortgage process is based on the fact that the market value of your home and property change over time. An appraisal provides your lender with the most current market value of your home, based on comparable homes in your neighborhood at the time of your purchase or refinance. Your home's market value is what your home is truly worth; the purchase price can vary up or down from the true market value.
What is the Importance of a Home Appraisal?
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The main reason a Home Appraisal is so important in the mortgage process is to determine the actual market value of your home, which is a key component to determining what your loan amount can be. The appraised value of your home is used in your mortgage process to determine your loan to value ratio (LTV). Your loan amount, appraised home value, along with other specific financial information helps determine what type of loan program and interest rate you will qualify for.
What does the Home Appraisal report consist of?
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The appraisal report reflects the size, age and overall condition of your home which are the most commonly known items included in the appraisal report. Always included are specific features of your home such as the number of bedrooms, bathrooms, and other physical characteristics. Included in the report are typically three to five side-by-side comparisons of similar homes in your neighborhood used to determine the market value of your home. They will attempt to find homes that have sold within the last six months. The appraisal also identifies relevant property characteristics, both those that would increase your value or decrease the home value. Examples of items that may decrease your home's value are flaws such as a driveway in need of repair, a roof needing replacement, or a difficult to access home to name a few. Items such as new room additions, waterfront properties, and/or superior neighborhoods are noted on the appraisal report and typically can increase your home value based on your neighborhood comparisons.
