Why is an appraisal needed to obtain a loan? This page explains the best reasons these are necessary for a home mortgage.
When you're buying a house, you often wonder if the list price is a fair one. The only way to tell is if you check the home price with comparable houses in the area. Then if you find that the house you are looking at is right in line with what others are selling for, negotiations for a better price may be appropriate.
It is never
an easy task to come up with a reasonable price for any home, and that
is the reason it is possible to ask for and get a reduction. Real estate
agents are the best resource any home buyer can have because they are
professionals in their field and can help you understand what factors go
into determining what that reasonable price is. Many times they can do comparables and come up with a reasonable market price.
Of course there are some home owners who are not willing to budge on the price even if you checked the home price against several in the neighborhood and find that the asking price is a bit out of line.
For this reason, you may decide to find out what the appraisal value of the home actually is. You can see where an appraisal could be your friend in this case.
Why is appraisal needed? Well, there are several reasons for having an appraisal done on a home:
But what about the lender, why would they want to see an appraisal? Usually its to certify that the agreed price is the true value of house in question. A good fair market appraisal needed to obtain a loan will be ordered.
This is actually for the lenders benefit. They don't want to loan more on a property than what its worth and they won't take the sellers word for the price of the house. They want to do a home price check with a certified appraiser to verify its value.
Since the mortgage company is interested in repayment of the loan, they want to be sure the property has the value necessary to secure the loan. Thus, an appraisal needed to obtain a loan is required.
If the appraisal comes back with a higher value than the amount of the loan, the lender feels very secure in loaning the money. But if the appraisal comes back lower than the loan amount, now the lender may say no or ask you to negotiate a lower price.
You can imagine how the seller would feel. He wouldn't be very happy and this could kill the deal. But you the buyer may be very happy. You don't want to pay more than the house is worth. Although, when emotions are involved and you really want the house, this can be a difficult thing. The lender is not going to loan more than the appraisal.
If the seller won't come down on price, you may have to put more money into the deal to get the house. That means a higher down payment to bring the loan amount down. Even then the lender may not work with it.
If you can find the appraisal value of a home, prior to purchasing it, you can decide for yourself if you are willing to pay the asking price or would like to negotiate for a better deal. Negotiating for a better deal is always recommended, but if you really want the house make sure that you don't try to negotiate too aggressively or you might just lose it.
Now that you know why an appraisal needed to obtain a loan is required, be sure the home price you're looking at is the true value of homes in that area. That way you can be sure your lender will loan the money necessary to buy this home.
Are you ready to find out if you're eligible for a home loan? Our Best FHA Home Loans page explains the FHA loan programs that are suited for first time home buyers.
Would you like to know what kind of loan programs are available? Visit our First Time Home Buyer Programs page for help that can enable you to make an informed decision.
Do you have questions or need more answers? Our Have a Question page is the perfect place to look for answers or ask your own questions. So go ahead....pick my brain!
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