What is an appraisal? An appraisal is a report provided by a licensed appraiser, which states that appraisers opinion on what, the current value of a specific property is. It includes pictures, charts and an assessment of the neighborhood. There are three methods used to asses the value, but the most common for residential mortgages is the Comparative Market Approach which heavily relies on the data involving the activity and sales of similar and like homes within a close geographical area.
Why is the appraised value of a property important? The bank relies on the information provided from the appraisal to determine if they want to lend and how much money they would lend on a specific property based on the value and condition, which is in the appraisal report.
What changed recently that suddenly homes are not appraising? Well in the last few years, there has been a decline in Real Estate values and therefore homes are appraising for less now than they have in recent years. People who want to sell or refinance are faced with appraisers who are very conservative on value because house prices are declining.
If I want to Purchase or refinance, can I choose my own appraiser?
Not anymore. This is another change that has occurred in the last year. There are new rules that lenders have to adhere to. This rule is called HVXCC, Home Value Code Of Conduct. Almost all mortgages in the country have to follow this rule which basically does not let anyone with any interest in the transaction speak to an appraiser regarding the appraisal and the value. So when you enter into a mortgage transaction, an independent appraisal management company randomly chooses the appraiser. The Realtor or Mortgage professional cannot speak to this appraiser to ask what the value may be or tell them what value is necessary to make the deal.
Once an appraisal is done and the value came in lower, is the appraiser fee refundable? No, appraisers get paid to do their job and once they have provided their report, the fee is not refundable anymore.
What are your options when the value comes in low? It is possible to challenge the appraised value. Usually you would have to provide the management company with new information such as another comparable sale or a copy of an active contract of sale etc. Once the appraiser has received the new information they can revise the appraised value at that point.
How can a person determine the value of there home before applying for a mortgage? There are some online sites, which for the most part are inaccurate. I would think that the best way would be to call a local realtor who has a good handle on the Real Estate market. They are familiar with the same information as the appraiser and therefore they can give you an accurate guide as your approximate value.
What are the biggest obstacles to getting an accurate appraised value? One of the biggest challenges is that a lot of appraisal management companies have appraisers from other areas do the appraisal. Sometimes those appraisers just cover the county where your home is but they are for the most part unfamiliar with the demographics of the area so the value can be wrong. For example about one year ago I did a refinance of an attached home in Spring Valley. The appraiser compared it to other attached homes in Spring Valley. Because he was not from Rockland, he didn’t know about all of our villages and unincorporated areas. This specific home was in South Spring Valley. There was a sale on the block that the appraiser missed because he never searched South Spring Valley. The appraisal came in about $60,000 less than it should have. If this was a purchase it may have killed the deal.
Appraisals are key components of the mortgage transaction. Understanding the in’s and out’s of the appraisal limitations and expectations is key to a successful transaction.
Tuesday, December 21, 2010
Tuesday, December 7, 2010
THE TEN COMMANDMENTS When applying for a Real Estate Loan
10)Thou shall not change jobs, become self-employed or quit your job. When applying for a mortgage, job consistency and security are one of the key elements of the approval process. If you change jobs, you have to have worked at least 30 days and provide a paystub verifying at least a 30 day history. If you change the method of employment, wage earner to self employed or commissioned, you may not be able to verify any income because the mortgage guidelines require a minimum of a 2 year history.
2) Thou shall not buy a car, truck or van (or you may be living in it)! This is a big deal. If you are approved for a mortgage loan and then buy a car, the added debt if you finance the car may make your commitment invalid. When qualifying for a mortgage, your income vs. your debt is analyzed. Any changes can negatively affect your file even post commitment. Nowadays, we actually check your credit right before closing and we require you to explain any inquiries on your credit report in writing as to who inquired, why and whether new credit was extended as a result of those inquiries.
3) Thou shall not use charge cards excessively or let your accounts fall behind. Since your credit report is what is used to verify your credit worthiness, your willingness to pay back the mortgage loan, your credit another key component to your mortgage approval. The higher your credit score the more likely you will get approved and the credit score will determine what interest rate you are qualified for. A lower credit score, even just a little lower can cost thousands of dollars over the life of your 30mn year mortgage.
4) Thou shall not spend money you have set aside for closing. Buying a home is costly, between the down payment and your closing costs. Before you enter into any real estate transaction your attorney and mortgage professional should give you a good estimate of how much money you will need to close. If you don’t have the money prior to closing, there are some things that can be done but they are not guaranteed and they have there own set of ramifications. The examples of ways to lower the costs to close are: a. Seller’s concession, where the seller agrees to pay a portion of your closing costs, within the allowable guidelines of the mortgage that you are applying for. b. You receive a lender credit, the bank/mortgage company raises your interest rate and gives you a credit or rebate at the closing to help with the closing costs c. You put less money down. This is not always possible and can result in higher rates, and PMI.
5) Thou shall not omit debts or liabilities from your loan application. Getting a mortgage today is not like it was in the olden days (like prior to 2007), so if you omit debts or liabilities, we will find out about it. We do many background checks and verifications prior to closing a loan. If debts and liabilities are omitted it can be construed as FRAUD and grounds for your loan to be denied.
6) Thou shall not buy furniture or appliances on credit. Any added debt can affect you qualifying for your loan. Ithe added debt and inquiries can possibly lower your credit score. If we discover this prior to closing on that last minute credit check your rate and approval can be affected.
7) Thou shall not originate any inquiries into your credit. Same as above, this can cause your credit score to be affected and thus affect your rate and approval.
8) Thou shall not make large deposits without first checking with your loan officer. All Large deposits need to explained and verified. It is not good enough to say that someone returned a loan, or it was cash in the house or someone gave it to you without verification, documentation and written explanations. Banks want to make sure that you are not taking on additional debt, if these deposits were loans. It doesn’t matter how good your credit is, how much money that you have in the bank or how much you earn..
9) Thou shall not change bank accounts. If you need to change accounts, discuss it with your loan officer. This creates a paperwork nightmare. We have to verify the withdrawal and deposit into a new account. The most important thing to watch out for is that many banks put a hold the initial deposit, even if it is a certified or bank check for 10 business days and this can affect your ability to get a certified check for your closing and you may have to delay your closing.
10) Thou shall not co-sign a loan for anyone. A cosigned loan is the same as your loan. The debt is on your credit as if it was yours. It affects your borrowing ability. After a years time most lenders will accept 12 months canceled checks from the other party and then the debt will not affect you except if it is delinquent.
2) Thou shall not buy a car, truck or van (or you may be living in it)! This is a big deal. If you are approved for a mortgage loan and then buy a car, the added debt if you finance the car may make your commitment invalid. When qualifying for a mortgage, your income vs. your debt is analyzed. Any changes can negatively affect your file even post commitment. Nowadays, we actually check your credit right before closing and we require you to explain any inquiries on your credit report in writing as to who inquired, why and whether new credit was extended as a result of those inquiries.
3) Thou shall not use charge cards excessively or let your accounts fall behind. Since your credit report is what is used to verify your credit worthiness, your willingness to pay back the mortgage loan, your credit another key component to your mortgage approval. The higher your credit score the more likely you will get approved and the credit score will determine what interest rate you are qualified for. A lower credit score, even just a little lower can cost thousands of dollars over the life of your 30mn year mortgage.
4) Thou shall not spend money you have set aside for closing. Buying a home is costly, between the down payment and your closing costs. Before you enter into any real estate transaction your attorney and mortgage professional should give you a good estimate of how much money you will need to close. If you don’t have the money prior to closing, there are some things that can be done but they are not guaranteed and they have there own set of ramifications. The examples of ways to lower the costs to close are: a. Seller’s concession, where the seller agrees to pay a portion of your closing costs, within the allowable guidelines of the mortgage that you are applying for. b. You receive a lender credit, the bank/mortgage company raises your interest rate and gives you a credit or rebate at the closing to help with the closing costs c. You put less money down. This is not always possible and can result in higher rates, and PMI.
5) Thou shall not omit debts or liabilities from your loan application. Getting a mortgage today is not like it was in the olden days (like prior to 2007), so if you omit debts or liabilities, we will find out about it. We do many background checks and verifications prior to closing a loan. If debts and liabilities are omitted it can be construed as FRAUD and grounds for your loan to be denied.
6) Thou shall not buy furniture or appliances on credit. Any added debt can affect you qualifying for your loan. Ithe added debt and inquiries can possibly lower your credit score. If we discover this prior to closing on that last minute credit check your rate and approval can be affected.
7) Thou shall not originate any inquiries into your credit. Same as above, this can cause your credit score to be affected and thus affect your rate and approval.
8) Thou shall not make large deposits without first checking with your loan officer. All Large deposits need to explained and verified. It is not good enough to say that someone returned a loan, or it was cash in the house or someone gave it to you without verification, documentation and written explanations. Banks want to make sure that you are not taking on additional debt, if these deposits were loans. It doesn’t matter how good your credit is, how much money that you have in the bank or how much you earn..
9) Thou shall not change bank accounts. If you need to change accounts, discuss it with your loan officer. This creates a paperwork nightmare. We have to verify the withdrawal and deposit into a new account. The most important thing to watch out for is that many banks put a hold the initial deposit, even if it is a certified or bank check for 10 business days and this can affect your ability to get a certified check for your closing and you may have to delay your closing.
10) Thou shall not co-sign a loan for anyone. A cosigned loan is the same as your loan. The debt is on your credit as if it was yours. It affects your borrowing ability. After a years time most lenders will accept 12 months canceled checks from the other party and then the debt will not affect you except if it is delinquent.
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