Buying A Home Part 4: The Appraisal Process
The Appraisal Process is one of the key components of your loan approval and will determine the price and condition of the home you are financing. In order to determine this value and condition, the lender will usually require that an appraisal be done.
The appraiser will often visit the property and take photos of the interior and exterior of the property. They will then compare it to all of the homes in that subdivision that have sold and closed within the past 6 months. They are typically able to travel up to 1 mile away from the property to get this information.
Once all of this information has been gathered they will then make adjustments and compare your home (the subject property) to all of the other homes (the comparable sales aka. comps) in the area and arrive at a value. Investment property reports will also contain information on market rents and will cost slightly more.
This form is then sent to the lender for satisfactory review.
If you are applying for an FHA or a VA loan the appraisers must be on the approved lists of these agencies. Both programs have slightly more stringent requirements for the condition of the property than a conventional loan. A home must be by all means Safe, Sound and Sanitary. If the appraiser does note repairs on the appraisal they will often have to be completed and re-inspected before the lender will allow the loan to close.
In my next report for the guide, we will discuss the Loan Terms and disclose a secret most lenders will not share with you.
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Until our next lesson,