What Is A Home Appraisal?
What exactly is a home appraisal? The question seems simple enough, but don’t feel bad if you don’t quite understand what a home appraisal entails or even why you might need one. As a part of the mortgage process, an appraisal is a key piece of the puzzle for a mortgage.
The Definition of An Appraisal
An appraisal is a detailed report that outlines both the valuation of a home and the reasoning behind the estimate. An appraisal is provided by an appraiser, who is licensed for the appraisal process. The appraisal report itself contains pictures and detailed descriptions of the home. It summarizes the status of everything from the square footage to the overall condition of the home.
After looking at items like the square footage, lot size, condition of the home,and the architectural details, the appraiser will provide a value on the home. While ultimately this is an opinion of the home’s value, it is certainly an educated one. This is why an appraiser must be licensed to provide the appraisal.
Home Appraisals Can Vary
You could likely ask for five different appraisers to conduct an appraisal and end up with five different home values. The values would be similar, but there is no absolute when it comes to valuing a home. In fact, different appraisers may use different methods to determine an appraisal value, and therefore arrive at different amounts.
Appraisals typically take comparable homes into consideration. These are homes that are either for sale currently or have sold in the recent past. In addition, some appraisals use an estimate of costs to physically replace the home to arrive at a value. Each appraiser has their method and thoughts on the process, and this will be outlined in the report. A report should be able to reasonably state justification for the value put forth in the appraisal report.
Why An Appraisal May Be Necessary
The logic behind appraisals is simple. At the end of the day, the mortgage lender is making their own educated bet that the mortgage will be repaid. As part of the process to protect the lender, it must make sure that the amount of money being loaned does not exceed the value of the house. An appraisal is a way to be more certain that the house offers the proper loan-to-value ratio and does not require private mortgage insurance (PMI).
The flip side of this is that an appraisal provides the homeowner with an indication of the value of the home. Sometimes, the value of the home may be above or even well above what you are paying for the home. In other times, an appraisal may indicate that a home is overpriced.
Range Lending Can Help With Your Appraisal-Related Questions
If you are looking to get started with the mortgage process and have some general questions about whether or not you may need an appraisal or would simply like to know more about the process, then look no further than Range Lending. Our team of experienced professional Mortgage Brokers offer simple and understandable answers to your questions. We can guide you through the process of obtaining a mortgage and help you navigate the world of home appraisals when the time comes. If you are ready to get started or ready to ask questions about the mortgage process, then contact Range Lending to begin.