What is the Value of Appraisals to Lenders?
Q & A with Dottie HermanQuestion: Does the home I am buying have to appraise for the loan amount or purchase price?
Answer: Lenders look at the appraised value to determine Loan to Value (LTV); Lenders initially disclose rates and fees based on the purchase price valuation. If the appraisal is higher or lower than your purchase price, be sure to discuss with your lender how this can affect the borrower.
The LTV on conforming loans will determine private mortgage insurance rates and requirement thereof. The loan to value can also determine mortgage rates. The lower the LTV equates to less risk for the lender and borrowers can potentially attain lower rates.
Side note - Equal Credit Opportunity Act was amended through the Dodd-Frank Act to require creditors provide applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling. Question: What does 'contract signed' mean on some of your listings?
Answer: A contract signed means that a written agreement has been signed by both seller & buyer to sell the property. That written agreement may or may not have contingencies, or points to be accomplished before a closing occurs (and if contingencies are not met then the contract may become null & void), and it would also generally have a closing date which all parties can work toward. Question: I have been looking in this neighborhood for a while and the available inventory is low. Can I get the mortgage even if the appraisal doesn't come in at my purchase price?
Answer: Potentially yes, talk with your lender how the loan-to-value will affect program guidelines as well as your affordability. Question: What is PMI?
Answer: Private Mortgage Insurance (PMI) protects lenders against losses that can occur when a borrower defaults on a mortgage. PMI is required on conventional conforming mortgages when the borrower has less than 20% equity/down payment. The cost of the mortgage insurance is typically added to the monthly mortgage payment. Question: In a real estate transaction, who is responsible to get the title search done, the seller or purchaser?
Answer: It is generally the buyer's responsibility to obtain the title search, unless the contract provides otherwise, but that would be unusual.