How to Understand Your Home Appraisal


A home appraisal is an estimate of ur home’s value.  It’s simply a professional appraiser’s opinion of what he/she thinks your home may be worth.

Why Do Appraisals Matter?

Mortgage lenders base your loan amount on the LESSER of the appraised value or the purchase price. Here’s an example:

  • You sign a contract for a $500,000 home with a $100,000 (20%) down payment.  Your loan amount in this case would be $400,000 (80% of the purchase price).
  • The appraisal comes back at a value of $480,000
  • The mortgage lender is no longer willing to lend you $400,000, because that would represent 83.3% of the appraised value.
  • The lender reduces the loan amount to $384,000, which represents 80% of the $480,000 appraised value.
  • You have three options:
    • Make up the difference yourself (purchase the home for $500,000 and come up with a down payment of $116,000); or,
    • Ask the seller to…

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