Borrowers prepping to buy their home or refinance their mortgage should know that appraisals are a part of the process. For first-time homebuyers, an appraisal will be quite beneficial since it will give them an honest, objective opinion of a property’s actual value. Current homeowners, on the other hand, looking to refinance their mortgage will benefit from it should they decide to take advantage of low-interest rates at the time of their application. To guide you on how you can use the appraisals to your financial advantage, let’s take a look at what appraisals are and how they could help borrowers and refinancing homeowners gain the most long-term value for their finances.

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What an Appraisal Is

Appraisals are a candid evaluation of a property conducted as part of the home buying or mortgage refinancing process. For home purchases (buying and selling), the purpose of appraisals is to verify that the home’s sale price corresponds to the home’s overall condition, features, and location. Refinancing transactions, meanwhile, helps assure lenders borrowers are not being handed more money than they should be getting for their mortgage. For the latter, it’s more of a protection against potential losses should borrowers keep up their mortgage payments, which may lead to foreclosure.

What’s the Difference Between Financial Appraisal and Refinance Appraisals?

Here’s how they differ:

Purchase Appraisal

A purchase appraisal determines the fair market value of a residential property. They are done at the behest of lenders just to be sure that they do not loan borrowers more money for a home than what the property is worth. The process is usually geared toward a homebuyer who took out a mortgage to purchase a home, which means if you have enough cash to pay it in full, you don’t need one. While purchase appraisals are seemingly conducted to secure lender investments, homebuyers benefit from it by getting an honest opinion of the home they’re purchasing. It can be a big problem if the results come in low, but it’s an opportunity for a homebuyer to renegotiate the price of the property.

Refinance Appraisal

Since refinancing is technically applying for a new loan with different terms and monthly dues, the appraisal process is pretty much similar to when the property was purchased. There are fewer risks for refinancing appraisals, though, as the results of the appraisal will not affect the property’s sales price. It does, however, influence the borrower’s refinance cash-out as the evaluation verifies the amount of equity on the property. Having enough equity and a lower loan-to-value ratio at the time of the refinance also gives homeowners a nice opportunity to get better interest.

Most, if not all homebuyers, may find appraisals as another point of challenge in the homebuying process. You can narrow down some of your considerations by searching for the perfect home in these available properties.

Disclaimer: Shop Owner Finance/ TL Global is not a lender. We are a real estate training agency. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

What an Appraisal Is

Appraisals are a candid evaluation of a property conducted as part of the homebuying or mortgage refinancing process. For home purchases (buying and selling), the purpose of appraisals is to verify that the home’s sale price corresponds to the home’s overall condition, features, and location. Refinancing transactions, meanwhile, helps assure lenders borrowers are not being handed more money than they should be getting for their mortgage. For the latter, it’s more of a protection against potential losses should borrowers keep up their mortgage payments, which may lead to foreclosure.

What’s the Difference Between Financial Appraisal and Refinance Appraisals?

Here’s how they differ:

Purchase Appraisal

A purchase appraisal determines the fair market value of a residential property. They are done at the behest of lenders just to be sure that they do not loan borrowers more money for a home than what the property is worth. The process is usually geared toward a homebuyer who took out a mortgage to purchase a home, which means if you have enough cash to pay it in full, you don’t need one. While purchase appraisals are seemingly conducted to secure lender investments, homebuyers benefit from it by getting an honest opinion of the home they’re purchasing. It can be a big problem if the results come in low, but it’s an opportunity for a homebuyer to renegotiate the price of the property.

Refinance Appraisal

Since refinancing is technically applying for a new loan with different terms and monthly dues, the appraisal process is pretty much similar to when the property was purchased. There are fewer risks for refinance appraisals, though, as the results of the appraisal will not affect the property’s sales price. It does, however, influence the borrower’s refinance cash-out as the evaluation verifies the amount of equity on the property. Having enough equity and lower loan-to-value ratio at the time of the refinance also gives homeowners a nice opportunity to get better interest.

Most, if not all homebuyers, may find appraisals as another point of challenge in the homebuying process. You can narrow down some of your consideration by searching for the perfect home in these available properties.