What is a Home Appraisal?
An appraisal is a written estimate of a property’s market value used by mortgage lenders to verify a property’s worth for prospective financing. Appraisals are performed by qualified independent real estate appraisers, typically after your purchase offer is accepted by the seller.
Why is an Appraisal Required?
An appraisal is essential to the mortgage loan approval process. Lenders use the appraisal to determine the appropriate loan amount. Because home values can vary considerably, it’s important for the lender to have an objective opinion of the value of a home before making a loan that will be secured by the property. A lender will not lend more than the value of the home, and the appraised value is used to determine common loan ratios that factor into the mortgage loan approval process, such as loan to value (LTV).
What Factors Affect a Home Appraisal?
Several items are taken into consideration when an appraisal is completed. The appraiser takes external measurements of the home to determine square footage and notes the layout of all rooms as well as the number of bedrooms and bathrooms. Other items that may be taken into consideration include:
- Overall condition of property
- Property location
- Architectural features
- Major structural improvements (additions or remodeled rooms)
Who Orders Appraisal?
Your mortgage lender will hire an independent appraiser that is licensed by the state Division of Commerce to complete your appraisal.