Refinancing is similar to the process that homebuyers go through when they are applying for their first mortgage. The refinancing process with a typical lender starts by submitting the financial documents. If the paperwork looks excellent, the lender will request the appraisal.
An appraisal is mandatory by the law. The commercial real estate appraiser will assess the value of your house and report the same to the lender. A homeowner might have to pay private mortgage insurance on the refinance. It is only when the requested loan amount is higher than the typical value of their house.
While assessing the value of your house the first thing that appraiser considers is the value of homes in the neighborhood. Even that isn’t possible to exactly know how much the appraiser will decide the value of your house. You can get an idea by looking at other homes in the area
The homeowners can make the repairs to their homes beforehand to ensure that the appraisal works appropriately. Once the homeowner is prepared well, they can prevent the refinance appraisal problems.
How To Prepare For A Refinance Appraisal?
You can easily prepare for the refinance appraisal once you learn about vital factors. Eliminate the risk of having a minimum appraisal by referring to refinance appraisal checklist before an appraiser visits your property.
Repainting is undoubtedly a quick and inexpensive way to improve your house, but the results can also be dramatic. A newly painted home weather insider outlooks cleaner, better, and maintained.
Clean and declutter
Even though grime and clutter should not affect the value of your house, they certainly can leave your appraiser with a wrong impression. First, you must clean your home from top to bottom. Remove the clutter during this process. Next, ensure that you sell the unneeded items at the garage sale or move them to a storage unit, organize the stuff into your bins, or give it away.
Clean up the landscaping
Exterior landscaping dramatically impacts the initial impression of the appraiser. It is known as curb appeal. You can improve your house’s curb appeal by painting the shrubs watering the lawn and laying down the mulch.
Why do owners refinance?
There are several reasons why homeowners refinance. Take a look at some of the reasons mentioned here
- Convert equity into cash for home improvements or debt consolidation by using a cash-out refinance
- A cash-out refinance allows you to kill two birds with the same arrow. First, you can easily convert the home equity into cash and refinance the mortgage.
- Swap your loan from a fixed rate to an adjustable-rate mortgage loan.
A fixed-rate mortgage is a type of mortgage where the interest remains the same for the loan term. On the flip side, an adjustable-rate mortgage is a home loan with an interest rate fixed for some time. It then adjusts overtime as per the market conditions.
Do you need to go for an appraisal to refinance?
When you choose to refinance, a lender almost requires you to undergo the appraisal process. It is because they want assurance that you are not getting a loan more than the value of your house. Refinance appraisal can determine if the home has gone up in value or depreciated since its purchase.
What to do with a low appraisal?
At times an appraisal comes low. It means that it can cause problems for you, or you might not be able to take out optimum equity. For example, your lender wouldn’t allow you to refinance if your appraisal is too low and shows that you are underwater.
The borrowers have the following options if the appraisal comes in too low.
You can request a new one by contesting the appraisal if it comes back lower than you expected. But you must be prepared to offer a lot of proof that your house is actually worth more than the appraiser’s value. Ideally, it happens when you notice some common errors in the appraisal report, like the square footage.
Consider paying the difference in your closing cost. This is not an affordable option if the appraisal dips much lower than the loan amount. Plus, you might have to wait for refinancing until the home values in the neighborhood go up.
Homeowners who choose to refinance can send different options, and some might not require an appraisal. However, the refinance operation must be supported by changing market conditions when needed.