An appraisal is a document provided by an appraiser (the person who conducts the appraisal report) that provides a professional estimate of the value of your home.
Appraisals are conducted by a third-party appraiser who is completely objective in their process. Appraisers do not work in favor of the lender nor the borrower. They simply conduct the appraisal and produce their findings.
Appraisals are most often conducted two ways. The first way an appraiser can conduct an appraisal is by noting comparables. Comparables, or comps for short, are properties within the neighborhood of the home you’re buying that are similar to yours. The appraiser will use the values of the similar properties nearby to determine the value of your home. The second way is by estimating how much it would cost to replace your home should it burn down or be otherwise destroyed. The appraisal will compile all of the findings of the appraiser including:
Comparisons with homes near the subject property
Notes about the real estate market in the area as a whole, including the ages of the homes and the average selling prices of the homes nearby
Notes about the appearance of the inside, outside, and surrounding area of your home
Notes about any visibly unfavorable characteristics about the home like cracked concrete or damaged windows
Pictures of everything that adds value to the home including, bedrooms, appliances, and fixtures
Why Lenders Need Appraisals
Lenders do not want to dish out more than the actual market value of the subject property. An appraiser’s goal is to determine that value. With this figure, the lender knows how much the property will sell for if you default on your loan. They also know how much they can lend to you without taking a loss if you default.
For example: If the subject property is appraised at $150,000 – that’s how much it will sell for on the open market. If your lender gives you a loan of $175,000 and you default on your loan, they now have to try to sell the home at a higher amount than what its appraised for, which can be difficult. If they end up selling the home for the actual market value, they’ve just lost $25,000. It is for this reason that lenders usually give a loan amount that is at or under the appraised value.
Why Borrower’s Need Appraisals
Appraisals are usually buyer paid and can be paid for at closing or during the application process. If you’ve signed a contract to buy a new home for $200,000 and the appraisal comes back valuing the home at $150,000, you should negotiate with your lender to lower the loan amount because you’re paying more for the home than it’s actually worth.
Overall, appraisals are a measure of protection. They ensure that neither party is lending or spending too much during the purchase process of a home.
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While the housing market continues to stabilize across the United States, there’s no guarantee that everyone in need of home financing will have a large down payment. However, you shouldn’t let that stop you from obtaining the mortgage you need for the home you love.
If you can still offer a down payment on your dream home, yet less than 20 percent of the appraisal value of the home, you will be required to obtain personal mortgage insurance (PMI). Personal – or private – mortgage insurance is a policy that protects the lender in the event of a client’s default.
PMI differs from government mortgage insurance in that not everyone will be required to obtain a PMI; however, it can’t hurt to sign up for it regardless. Private companies facilitate PMI’s and act as the beneficiary, while you (the borrower) pays the premium. The rates for a PMI vary depending on how much you borrow and how much you are able to offer as a down payment. Typically, rates for a PMI don’t reach above 2 percent. For example, say you buy a $200,000 house and are able to make a 15 percent down payment. You have to borrow $170,000, with a PMI rate of 0.56 percent. If you multiply your loan amount by the premium (0.0056), that makes your annual premium $952, or a monthly payment of $79.33.
If you are a borrower that needs to obtain or is interested in a PMI, please contact us for further questions and details.
Winter is just around the corner. Apply today, Move in Tomorrow!
If you have not noticed, The heat is finally starting to disappear in Las Vegas. That means the cold desert winter time is approaching quickly. We know, just like all of the Las Vegas locals know, that the fall and winter time in Las Vegas means more nights outside with friends and families, special events like the Monster Energy AMA Supercross World Finals, Monster Truck World Finals, Nascar Camping World Truck Series at Las Vegas Motor Speedway and the Rodeo World Finals are coming up soon. Wouldn't it be nice to have a new home?
Not just any new home though. A New Home with more space for friends and family to stay with you when they come in to town. Well Valley West Mortgage has made it easier for experienced potential home buyers, as well as first time potential home buyers to get approved today! We have updated our website, adding new tools and calculators for all potential home buyers. We have also added a new Frequently Asked Questions section.
We said it would happen and soon. Average rates have just passed 5%
What we don't know is how far or how fast this Mortgage Rate rise will be. Recent positive indicators for the economy have caused rates to rise. Mortgage Rates parallel Long-Terms Bond Rates and those always rise on positive economic news. It is more important than ever to have your Refinance or Purchase file in the hands of a competent Mortgage Professional! At Valley West Mortgage, we keep a very close watch on rates for our clients. While rates are clearly on the rise, they still have their ups and downs. We watch all of the rate change indicators for potential changes so we can lock rates at the best possible advantage for our clients.
The key to being ready to lock is having a complete file which is ready in every respect. With our clients help, and help from our Realtors on Puchase files, we do everything within our control to make sure that your file is complete, as quickly as possible. In this way, we won't miss any opportunity to secure the best terms possible! Give us a call today so we can help you to succeed even in this unstable market. Remember, Las Vegas is still one of the best buying opportunities in the entire country regardless of current rate fluctuations.
Call (702) 696-9900 or (888) 931-0007 and let Valley West Mortgage get you ready to close!
It is now cheaper to buy than rent in 72 percent of US cities and Las Vegas is near the top of the list!
Let Valley West Mortgage help you finance your dream home in one of the most affordable cities in the country!