Are you ready to buy your dream home in Maine? You may have questions about the home appraisal process. For homebuyers, an appraisal of the property ensures you don’t overpay. If you’re refinancing, an assessment is needed to ensure you have enough equity to borrow against. For homebuyers and those looking to refinance their homes, an appraisal can help you qualify for a loan, protect your investment, and more. Read on for more home appraisal tips.
Lenders require an appraisal because they can’t lend more money than a certain percentage of the value of the property. It's worth noting that an appraisal is entirely separate from a home inspection. A home inspection is a review of the functional quality of your home. An appraisal determines the financial value of your new home.
How do appraisals work, and why are they important?
Home appraisers are licensed professionals who assess real estate and calculate the worth of a specific property. The appraiser must legally be a neutral third party in the mortgage transaction. This ensures they’re not biased toward any of the other parties involved.
So how does it work? The appraiser inspects the exterior and interior condition, lot size, home improvements the seller has made, renovations, and other factors. The appraiser will also check comparable homes sold in your local area. They use this sale data to adjust the value of your new home based on how its condition stacks up to the competition.
Benefits of getting an appraisal for homebuyers
- Avoid overpaying for a home. An appraisal can help you determine if the purchase price of a home is fair and in line with the market value.
- Qualify for a mortgage. Most lenders require an appraisal before approving a mortgage loan. In today's mortgage industry, a bank will only give you a loan up to a certain percentage of the home's fair market value.
- Negotiate the purchase price. If the appraisal comes in lower than the purchase price, you sometimes can negotiate a lower price with the seller.
- Protect your investment. An appraisal is necessary because it protects your investment. It's there to ensure that, as the buyer, you don't pay more than the home is worth.
- Determine home insurance coverage. Insurance companies use appraisals to determine the value of your home and set your insurance premium.
Why Do Lenders Need A Home Appraisal For A Refinance?
Your lender wants to be sure that the value of your home will cover the amount of your new loan. Why? If you default on your mortgage, your lender can recoup its losses by selling the home. Additionally, if you want a cash-out refinance to tap into your home equity, a cash-out refinance appraisal lets you know how much equity you have in your home.
An appraisal is an integral part of the homebuying process. It's one of the best ways to protect your investment. If you have any questions about the homebuying process, please don't hesitate to contact one of our experienced loan officers. KFS Mortgage Company is here to help you make homebuying as easy and stress-free as possible.