Is Your Assessment Too Low To Get A Mortgage? Here are your options
When you’ve applied for a mortgage to buy a home or refinance an existing loan, your lender obviously takes your financial credentials into account when deciding whether or not to approve you. It means looking at your credit score and your income.
But there is another factor that is crucial for loan approval: the market value of your home. This is determined by a home appraisal, which is designed to show how much your home is worth on the open market.
Unfortunately, if your valuation is too low, it could make it impossible to approve a loan. This is because lenders will not lend you more than a certain percentage of the value of the house, for example 80% or 90% of the market value of the property as determined by the appraisal.
If a low appraisal hits you, you have several options to potentially get you back on track and get your loan approved.
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Don’t give up on a mortgage because of a low valuation
When your rating is lower than your expectations, your first and best option may be to request a call.
Many lenders will allow this, and that simply involves asking the appraiser to reconsider your home’s valuation. You may be able to provide supporting documentation, such as showing comparable sales of properties similar to yours that sold for a higher amount.
An appeal may very well lead to a successful revaluation of your home which will ultimately qualify you for a loan. This is the best of times, but it won’t always work. And if a call doesn’t provide the higher valuation you need, you’ll need to consider other solutions.
If you are buying a home from a seller, rather than trying to refinance your existing home loan, you can also contact the seller with the low appraisal and see if they are willing to lower the price of the property. This might work in your favor, since you wouldn’t have to pay that much for the house.
If you have an appraisal contingency in your purchase contract that requires the house to appraise enough for the sale to go through, the seller may be willing to lower the price because otherwise you can opt out and get any deposit back.
However, the seller could very well refuse to lower the price despite what the valuation says. And the chances of that happening are very high right now, especially since this is a sellers’ market and many people are bidding entirely in cash or priced above the list price of homes. If the seller is not playing with you, you will have to look for another solution.
Another option would be to consider working with another mortgage lender. This lender will have its own appraisers. It is possible that these professionals come with a higher valuation for your home. The obvious risk here is that it is also possible that the assessment comes with the same assessment or even with a lower market value. In this case, you would lose the money for the new assessment and you would be back to square one.
Finally, your last option may be to find more money. If you pay $ 250,000 and the lender was willing to loan you up to 90% of the appraised value of the house, but the property is only worth $ 200,000, you could increase the money you bring in.
You should increase the amount from $ 25,000 (10% of $ 250,000, which you planned to pay) to $ 70,000 (the $ 20,000 down payment required by the lender, plus the additional $ 50,000 for the seller. that the lender would not be willing to contribute).
The best option for your situation will depend on whether you are buying or refinancing a home, whether you have the option of opting out of a sale if the home is not sufficiently valued, and whether or not an appeal works for you.