2009.09.13 21:33:59

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An appraisal is an essential part of the home loan approval process

If you are shopping for a home loan to purchase a home or refinancing your current mortgage, you may already know that a home appraisal is almost always required before a loan can be approved. However, if you are like many other borrowers, you might not know about appraisals or why they’re are so important.

Appraisals have been a hot topic in recent months due to new rules that have changed how lenders and mortgage brokers orders appraisals for certain types of loans. The rules are spelled out in the Home Valuation Code of Conduct (HVCC), which became effective May 1, 2009.

What is an appraisal?

Technically, a real estate appraisal is an opinion of a property’s value prepared by a licensed real estate appraiser. Each property is unique, so the appraiser must rely on his or her experience together with the information gathered about the neighborhood such as property sales prices of other comparable properties to determine the value of a property. Appraisal are meant to be unbiased and free from the influence of anyone’s opinion of the home’s value. The new rules have placed greater restrictions on attempts to unduly influence appraisers.

Who pays for the appraisal?

Borrowers pay for a home appraisal upfront since the appraisal must be completed before the lender will approve the loan. Under the new HVCC rules, borrowers who switch to a different lender during the loan process, as sometimes happens, will most likely have to pay for another appraisal to satisfy the new lenders approval requirements. Even though the borrower pays the appraiser’s fee through the lender, the appraiser typically is independent and not an employee of the lender. The main purpose of an appraisal is to help the lender assess the value of the property and decide whether to approve the loan. That’s why a new appraisal typically is required for a loan refinance as well as a home purchase.

Is an appraisal the same as a home inspection?

Another common misconception is that a home appraisal is the same as a home inspection. Appraisers do consider the condition of the home and may note any major problems.

First Choice Mortgage Company’s is committed to be a information and education resource for the Colorado mortgage consumer and a full range of mortgage tools can be found on our website www.FirstChoiceMortgageCoLLC.com. We pride ourselves on being a full-service mortgage company where you get the advantage of experienced mortgage professionals, great rates and a very wide range of mortgage products.

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