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Step 14: The Appraisal

An independent appraiser confirms the home is worth at least what you're paying, which protects you and the lender.

The lender orders an appraisal from an independent, licensed appraiser to confirm the home is worth enough to secure the loan. You usually pay the fee, typically $500 to $900 for a single-family home.

How appraisers value a home

The appraiser inspects the property, then compares it to recent comparable sales nearby, adjusting for size, condition, features and location. FHA, VA and USDA appraisals also check minimum property requirements for safety and soundness.

Why the value matters

Your loan-to-value ratio is based on the lower of the price and the appraised value. A low value can raise your down payment, change your pricing or add mortgage insurance.

If the appraisal comes in low

The difference between the price and the value is the appraisal gap. Your options:

  1. Renegotiate the price down to the value.
  2. Split the difference with the seller.
  3. Pay the gap in cash, on top of your down payment.
  4. Challenge the value with a reconsideration of value, if you have better comparable sales.
  5. Cancel under your appraisal contingency, or the FHA/VA amendatory clause.

Appraisal waivers

Some conventional loans qualify for an appraisal waiver, where the lender accepts the price based on data. It saves time and the fee, but you lose an independent check on value.

Next: title search and title insurance.

Your next move, by loan program

  • Conventional: Some conventional purchases qualify for an appraisal waiver based on the automated findings. If yours does, you can skip the appraisal fee. Track my appraisal
  • FHA: The FHA appraisal also checks minimum property standards. If the value is low, the FHA amendatory clause lets you cancel. Track my appraisal
  • VA: If a VA appraisal comes in low, ask about the Tidewater process, which gives you a chance to send comparable sales before the value is final. Track my appraisal
  • USDA: USDA appraisals check value and basic property standards. Repairs may be required before closing. Track my appraisal
  • Jumbo: Loans above certain amounts may require two appraisals. The lender uses the lower value. Track my appraisal
  • Investor: DSCR appraisals usually include a rent schedule. The appraiser's market rent can set your qualifying rent. Track my appraisal