How to Refinance Your Home: Home Appraisals Advice, Home Tips, Property Guide
How to Refinance Your Home: Home Appraisals
9 Nov 2020
If you are planning for mortgage refinancing, there are a lot of factors that you need to consider on the appraisal. If the value of your property is as low as the water’s under the surface, then it would be impossible to request home refinancing.
If your home equity has an appraisal value that is less than 20 percent, then the money you can get from home refinancing will be sent for PMI or Private Mortgage Insurance. There will be times you are required to use your own cash as a payment. Aside from that, the lender might not allow you to avail of the low-interest rate if this happens. This is because most lenders think that borrowers who have low equity value aren’t capable of paying on time.
If refinancing your home comes into your mind, it is essential to keep in mind that appraisal plays one of the crucial roles throughout the refi process. Additionally, take note that preparing your home is one of the first things you should do to increase its value as well as ace your refinancing goal.
How to Refinance Your Home Guide
Things to Remember
- If you are planning for mortgage refinancing, you are required to get an appraisal before moving onto the next process. Currently, a single-family home appraisal costs around 300 US Dollars to 500 US Dollars.
- The appraiser is the one who will perform some evaluations in your house. They will personally visit your house to take an assessment before giving you an appraisal.
- Increasing your home’s appraisal value can be done by showing off its hidden features, cleaning it thoroughly, getting rid of the things that need to be thrown, and repainting the walls and ceilings.
Home Appraisal – What Is It?
A certified or licensed person is called an appraisal. He is the one who conducts a thorough evaluation of the house. Considering that he is the one who performs the assessment, the home’s value will also come from his opinion. It is important to get a reliable and trusted appraisal to avoid unbiased and disinterested opinions.
Just like the other workers involved in the home refinancing, you are required to pay the home appraiser an exchange to the service he did for you. But take note that the only work of an appraiser is to assess and give your home the right value. He hasn’t something to do with the processes involved in home refinancing.
When it comes to the refinance process, a home appraisal will help the lender to know the amount of money is that it is applicable to the home’s value. In case the property has set to foreclosure, the lender has the right to resell the borrower’s home as the payment for the borrowed money.
The home evaluation of an appraiser will last for 30 minutes to one hour. Within this moment, the appraiser will take some photos of the interior rooms, garage, and exterior furniture. Aside from that, he will also examine the overall home condition, amenities and determine its dimensions.
After the examination, they will compare it to their previous home transaction records that have similarities to your property, which in most cases, the properties recently sold by your neighbors. Combining the result of the appraiser’s home examination and transaction records, he will create his final opinion about your home’s value. Take note that his opinion is done professionally, without a third party involvement.
This information, together with your credit history, assets, and income, will be assessed by your potential lender. They can then decide how much money they will allow you to borrow and what terms suit your situation.
How Does Home Appraisal Work?
There are only two refinancing transactions wherein appraisal is not necessary. These are the Veterans Administration’s (VA) Interest Rate Reduction Refinance Loan and the Federal Housing Administration’s (FHA) Streamline Refinance. Other than that, the appraisal is one of the requirements needed for most types of refinancing transactions.
The behavior of the appraisers, as well as the lenders, should be according to what has been set by the federal regulations. According to the Truth in Lending Act and Dodd-Franck Act, “Home appraisals should be conducted independently and free from inappropriate influence and coercion.”
Considering that the federal appraiser set a narrowly scoped requirements regarding the possible connection between the loan officers and the appraiser, most lenders find it hard to connect with the appraisers with the mindset of possible law violation by showing an intention to influence the opinion of the appraiser prior to the completion of the appraisal.
According to a mortgage broker, regional banker, and senior loan advisor, Joe Parsons, “using an AMC (Appraisal Management Company) is not a requirement, but that is the common approach to appraiser independence.” With that being said, the lender will work with the Appraisal Management Company regarding the appraisal order.
How to Prepare for an Appraisal
Take note that there is a huge difference that separates the home preparation for a potential buyer and home preparation for the appraiser’s visit. As stated again by Mr. Parsons, “When you are opening your home to a prospective buyer, you want to trigger emotional responses. As a seller, you want that buyer to be able to imagine how happy and comfortable they will be there. No subjective considerations apply to an appraisal.”
How to Refinance Your Home: Final Thoughts
When you are requesting an appraisal, it is important that you will hire a reliable and trusted home appraiser. That’s why it is vital to understand the processes included in the home evaluation.
Keep in mind that the appraiser’s decision regarding your home’s evaluation may not always come in what you have expected. As such, you should understand that the appraiser’s decision is according to his or her preference.
Aside from preparing your home for an appraiser’s visit, it is important to build a good credit history. Your credit history also affects the amount a bank would allow you to borrow. So, if you have plans to refinance your property in the future, prepare it as well as your credit history.
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