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Host: What is an appraisal?
Jeff Thomas: Appraisal is done by a disinterested third party that's either ordered by the loan officer or by the mortgage company or with a VA loan, by the Veteran's Administration. It could be ordered by the actual lender and what it does, is it goes out and the appraiser does a couple of different things.
The first thing he does, is they make sure that there is actually a property there, that sounds kind of funny, but that's what they do, they make sure there is a property there, they review the property to make sure to the house is in livable condition and then they make sure that you are not paying too much for the house. They are going to review what they call comparables, which are recent sales in that neighborhood or as close to that neighbor as they can possibly get, to make sure that you are buying a house for a 100 that is not worth 50, because you don't want to overpay for the house. Because the lender is only going to lend you the sales price or the appraised value or whichever one is less. So, if that the sales price is a 100,000 they are only going to lend you a 100,000. If the appraisal comes in at a 100, then you are fine. If the appraisal comes in at a 101,000 well then you are still fine; but if it comes in at 99,000 well then that gives you the ability to go back to your seller and either renegotiate to a lower price, opt out of the contract or if you really like the house and you can't renegotiate the contract, you can bring that extra $1000 to close in.
Expert: Jeff Thomas
Mortgage Advisor
Jeff Thomas is a Mortgage Advisor and Financial Educator with Family Lender, Inc. located in Fairfax, Virginia. Jeff has seen the mortgage business change significantly in the 15 years he has been in the business. Changes such zero down loans, to relaxed underwriting guidelines to borrowing more than the house is actually worth on a purchase or refinance transaction. With the changes in the mortgage industry, More »
About This Video
In this video, mortgage advisor, Jeff Thomas describes how to purchase your first home and the process you must go through to obtain a mortgage. This video is designed for first time homebuyers and also provides More »
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Tags: Mortgage, House, Purchasing, Buying, Credit, Payment
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