What it means for your home financing—and what to expect along the way.
An appraisal provides an independent opinion of a property’s value and is an important part of many home purchases and refinances.
For your financing, the appraisal helps us understand the value of the home being financed. Here’s what an appraisal does, how the value is developed and what happens once it’s complete.
A home appraisal is an independent professional opinion of a property’s value.
When a traditional appraisal is required, a licensed or certified appraiser evaluates the property and relevant market information to develop an opinion of value. The appraiser is an independent professional whose role is to provide an objective valuation of the property.
Not every loan requires a traditional appraisal. Depending on the property and financing, another approved method of determining the property’s value may be used.
The value of the home is an important part of your financing. An appraisal helps determine whether the property’s value supports the loan.
If you’re purchasing a home, it’s important to remember that the purchase price and appraised value are not the same thing. The purchase price is the amount you and the seller agreed upon. The appraised value is an independent opinion of the property’s value.
If you’re refinancing, the property’s value can help determine the amount of equity you have in your home and may affect the financing options available to you.
When a traditional appraisal is required, the appraiser gathers information about the property and considers factors that can affect its value, such as its location, size, features and condition. Depending on the type of appraisal, this may include a visit to the property.
The appraiser also researches the surrounding market and recent sales of comparable properties—often called comps—and makes adjustments for meaningful differences between those properties and the home being appraised.
The appraiser brings this information together in an appraisal report that documents the property, the information considered and the resulting opinion of value.
In some cases, a traditional appraisal may not be required for your financing. Instead, your loan may be eligible for an appraisal waiver based on the property, available data and the requirements of your loan.
An appraisal waiver doesn’t mean the property’s value is unimportant or that we simply skipped a step. It means a traditional appraisal is not required for the financing based on the information and eligibility requirements used to evaluate the loan.
If your financing is eligible for an appraisal waiver, your Loan Officer will let you know.
An appraisal and a home inspection serve different purposes.
An appraisal is primarily about value. An appraiser may observe property characteristics and conditions that affect the valuation or applicable lending requirements, but the appraisal is not a comprehensive evaluation of the home’s condition.
A home inspection takes a closer look at the property itself. An inspector evaluates the home and its systems to help you better understand its condition and identify potential concerns.
An appraisal should not be considered a substitute for a home inspection—even when an appraisal is waived.
When a traditional appraisal is completed, you’ll receive a copy of the appraisal report.
Take some time to review it. The report includes more than the final value. It provides information about the property, comparable sales and other factors the appraiser considered when developing the valuation.
If you have questions about what you’re seeing, your Loan Officer can help you understand what the appraisal means for your financing.
If the appraised value is different than expected, it doesn’t necessarily mean your financing can’t move forward.
For a home purchase, a value below the agreed-upon purchase price may affect the financing. What happens next depends on your loan, your purchase agreement and the circumstances of the transaction.
For a refinance, the appraised value may affect your available equity or other aspects of the financing.
If the value is different than expected, your Loan Officer will help you understand what it means for your financing and what options may be available. There are also established procedures for addressing questions or potential concerns with a valuation when appropriate.
A Department of Veterans Affairs (VA) appraisal has an additional role.
Along with providing an opinion of the home’s value, a VA-approved appraiser evaluates the property against applicable VA Minimum Property Requirements. These requirements help ensure the property meets VA standards related to safety, soundness and sanitation.
If an issue related to those requirements is identified, it may need to be addressed before the property can meet VA requirements for the loan.
And just like any other appraisal, a VA appraisal is not a home inspection. The VA appraisal’s property requirements do not replace the more detailed evaluation of the home and its systems provided by a professional home inspection.
If you have questions about the appraisal or a VA property requirement, your Loan Officer can help you understand what it means for your financing.
Your appraisal is one piece of the bigger home financing picture. It gives you and your lending team important information about the property and what it means for your financing.
Understanding your financing is part of feeling confident about your next move—and your First Savings Mortgage Loan Officer is here whenever you have questions.
