fbpx
Skip to content
  • About Us
    • Partners
    • Philanthropy
    • Silverton Mortgage Careers
    • The Silverton Foundation
  • Find a Loan Originator
  • Loan Programs
    • Silverton Secure+
    • MH Advantage®
    • Construction-Permanent Loan
    • Conventional
    • FHA
    • VA
    • USDA
    • HomeReady® Mortgage
    • Jumbo Loans
  • Resources
    • Speaker Series
    • Blog
    • News
    • Contact Us
    • Careers
  • Apply Now
  • Login

Why Appraisals Are Important

October 25, 2021 | Helpful

It’s no secret that the housing market has been a bit unusual this year. With low inventory and eager buyers, it has been a dream for sellers while nearly impossible for thousands of homebuyers who have been on the lookout for affordable options. Homes are receiving multiple offers above the asking price, which puts those who seek financing via a lender in a delicate situation. That’s because most lenders will not loan more than the home’s appraised value.

An appraisal is when an independent third party evaluates a home to determine its current market value. Obtaining an appraisal is an important and necessary step in the mortgage process. The majority of lenders require this in order to confirm that the value of the property aligns with the amount being borrowed. However, this makes it tough for those purchasing a home through financing to compete with cash offers. In a normal housing market, buyers will often make an offer and include an appraisal contingency, giving them the ability to back out of a real estate sales contract if the home’s appraised value is less than the offer.

However, with inventory so low, many are seeing the benefit of waiving such contingencies to be in better standing with the seller. While this could increase your chance of having your offer accepted, it may not be the best idea for your finances in the long term. When waiving an appraisal contingency, that means you’re willing to pay the amount you offer, regardless of what the house is actually worth. If the appraised value is less than the offered price of the home, the you would need to make up the difference in the value with cash. Appraisals don’t only benefit the lender; they are an important guide so homebuyers don’t pay more than a house is worth, and potentially end up owing more than the market value of the house. To help borrowers stay in the game, some are now offering Appraisal Guarantees. Designed so that borrowers don’t have to worry about a low appraisal affecting their home purchase, this program has its drawbacks. For instance – to use an Appraisal Guarantee, the loan must meet the lender’s requirements including a providing a minimum down payment and staying below the maximum loan amount. Homebuyers using the Appraisal Guarantee are also required to use the lender’s affiliate real estate agent. This could take a lot of properties off the table. Using this option may do more harm than good if the housing market corrects itself because the borrower risks being underwater, or owing more than their home is worth, on their mortgage. That’s because they’re paying more than what the home is actually worth, which isn’t sustainable once the market evens out. When the buyer is ready to sell, the comps—or similar homes have recently sold in the area—may not be in their favor.

So how do you compete in today’s market without shooting yourself in the foot? There are several options that can help you avoid borrowing more. First, talk to a lender that can help you determine what you can realistically afford. Once you’re pre-approved for a specific amount, look for homes that are under budget so that you can be prepared to offer more. Also, find a great real estate agent whose negotiating skills you can benefit from. They can often be your best bet when it comes to helping you make a strong offer and stand out in a competitive market. If possible, be flexible on your location. Your wish list may be easier to obtain in one location than another. These strategies may not result in your absolute dream home but you’ll also avoid borrowing more than your home is worth, which could be a relief when prices average out.

At the end of the day, don’t let the idea of an appraisal scare you away from pursuing your dream of owning your own home. It’s a necessary step designed to protect everyone involved, especially you—the homebuyer. Let a Silverton Mortgage professional help you find the right loan to fit your unique needs so that you are comfortable with your home purchase now and later on down the road.

Share This Article

You Might Also Like

September 20, 2022 | Helpful

Student Loan Debt and Homeownership

If you have student loan debt, you are certainly not alone. In fact, as of 2022, there are an estimated 44.7million Americans who have student loan debt, according to Education Data.org. Sure, student loan debt can be a...
Read More

June 7, 2022 | Helpful

Homeownership Is For Everyone!

Homeownership has been touted as the ultimate “American Dream” and for good reason. Aside from the stability that owning a home can offer via having a set monthly payment, expected tax breaks (if you qualify –...
Read More

April 20, 2022 | Helpful

Think Bigger with a Jumbo Loan

In some instances, a conventional mortgage isn’t enough to finance a home. That’s where a jumbo loan* comes in. Jumbo loans are an option for eligible borrowers who are interested in properties that are valued higher...
Read More

Relax. We've got this.

Apply Now
Equal Housing Opportunity Logo
  • About Us
  • Partners
  • The Silverton Foundation
  • Find a Loan Originator
  • Loan Programs
  • Careers
  • Blog
  • News
  • Login
  • Contact Us

Vanderbilt Mortgage and Finance Inc., dba Silverton Mortgage
1201 Peachtree St NE, Ste 2050, Atlanta, Georgia 30361|855-815-0291
NMLS 1561|Silverton Mortgage NMLS access page (www.nmlsconsumeraccess.org)| Licensing

© 2023 Silverton Mortgage. All rights reserved.
Lending services provided by Silverton Mortgage.
Equal Housing Opportunity.

All loans are subject to credit approval.

*Silverton Mortgage is authorized to originate FHA, VA, and USDA loans, but it is not an agent of, or affiliated with, the U.S. Government. All trademarks are property of their respective owners.

Vanderbilt Mortgage and Finance, Inc., dba Silverton Mortgage, 1201 Peachtree St NE, Ste 2050, Atlanta, GA 30361, 404-815-0291, NMLS #1561, (http://www.nmlsconsumeraccess.org/), AZ Lic. #BK-0902616, Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act license, Licensed by the N.J. Department of Banking and Insurance, Licensed by PA Dept. of Banking, Rhode Island Licensed Lender. Licensing information: https://silvertonmortgage.com/licensing/ . All information is believed accurate and is subject to change without notice.

CA Resident Privacy Policy | Clayton Homes and Legal and Privacy at Vanderbilt Mortgage and Finance (vmf.com)

logo Silverton Mortgage Finance your perfect home.
1201 Peachtree St NE, Ste 2050 Atlanta, GA
Phone: 855.815.0291
Equal Housing Opportunity Logo