Mortgage applications require you to get an appraisal on the home you are purchasing to receive an unbiased valuation of the home. An appraisal is the estimate of your home’s value done by a licensed professional. The appraiser takes into account the square footage, number of bedrooms and bathrooms, condition of the home and recently sold comparable homes in the neighborhood to come up with the appraised value.
Your loan officer will order the appraisal from a third-party certified or licensed contractor. The cost of the appraisal depends on the location and size of the property. Other factors such as rural properties, investment properties, manufactured home, or multi-unit properties can also affect the price. The price is generally between $400-$600, but it can be higher. Typically, it is the buyer’s responsibility to pay for the appraisal, and it is paid for early in the process outside of closing. In addition to inspections and moving costs, this is another cost to consider in your budgeting. The appraisal can take anywhere from a few days to a few weeks to be completed and sent to the lender.
Once the appraisal is complete, your lender will review it. If the appraisal reveals any problems with the home, the lender may require that they be fixed before the loan can be approved, or they could cancel the loan for that property all together. If the appraised value is less than the purchase price, the lender will have restrictions on a maximum allowable loan amount that may affect the terms of the sale. This scenario may cause a renegotiation with the seller. You may pay the difference yourself, negotiate with the seller to reduce the purchase price, come up with a compromise with the seller, or cancel the contract.
A home inspection is an option that the buyer has before purchasing their home. It is usually not required by the lender. In some cases, a termite inspection, septic inspection, or water potability test for well or private water may be required. A home inspection may provide a better idea of any of the home’s problems before you buy it. A home inspection is the buyer’s responsibility to order and pay for. You should hire a certified home inspector. Home inspections cover a wide range of areas in the home, but be aware that they do not cover inside the walls, the roof or chimney, septic tanks, or structures separate from the house such as sheds. If you want something inspected that is not covered in the inspection, you can look into another specialized inspector. Your real estate agent will be able to help you with this. Once your inspection is complete, make sure you save a copy of the inspection report. Depending on the terms of your purchase contract, you may have the option to negotiate to have the seller make repairs. Or, if your inspection shows many problems that you or the seller are unprepared to handle, you can terminate or cancel the contract. Depending on the language of the contract, you may be able to get your earnest money back.
Our loan officers are a great resource to answer your questions and explain the home buying process. If you have any questions, please feel free to contact us at 877-276-1903.
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