Q & A: Low Appraisals, Home Equity Loans

Q & A: Low Appraisals, Home Equity Loans

Residential News » Q & A with Dottie Herman | By Dottie Herman | June 28, 2013 9:59 AM ET

My husband and I are in the process of buying a home. The home didn't appraise for the amount agreed upon. Are we still able to buy the home? What will the appraisal affect? Will we still be able to get a mortgage?

Unfortunately, this is not uncommon these days, but there are a couple of options.  Depending on your down payment, you may be able to move forward, but with an added cost (mortgage insurance) if you are putting down 20 percent.  If you are putting down the minimum allowable for any loan (3.5 percent for an FHA), that can be a problem. The point is, this depends on the structure of your financing.  Alternatively, make sure your attorney is aware of this as they can have a discussion with the seller's attorney about re-opening negotiations based on the short appraisal. This happens often, but deals regularly move forward based on one of these two options.

What type of loan (equity line of credit or loan) would be better to take out to pay off credit cards and do minor home improvements on an investment property? Total debt is $45,000 and have two credit scores over 710.

I'm assuming you are asking about a home equity line of credit OR home equity loan (as opposed to a first mortgage). The real question here is how quickly you intend to, or can, pay it back. If you can pay back fast, the line of credit is the better way to go. You only pay for the money you have outstanding and are only billed for the interest for the first 10 years. However, the rate is adjustable. If you can pay it back fast, the interest rate is somewhat inconsequential and this gives you the most flexibility. A loan (whether a tradition mortgage or home equity loan) is a loan with a fixed rate (generally). This gives you the stability of knowing exactly what the payment is. If this is a longer term scenario (meaning you won't be paying it off for a while), this would make the most sense to consider. It really depends on what your plans are.

I listed my home about two months ago with a broker in the area. I am incredibly unhappy with their service and communication among other things. What options do I have?

If the agent you are working with is not meeting your expectations, you may wish to speak with the principal of the brokerage agency to see if there is another agent better suited to represent you.  In addition, you should review the terms and conditions of your listing agreement with respect to potential early termination of the agreement. However, you should consult with an attorney about contractual matters.

Dottie Herman is CEO of Douglas Elliman. If you have a real estate question for Dottie, please send it to;

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