If you have ever purchased a home, transferred title or refinanced your current property. Appraisal is one process that is used to establish the property’s current market value. In the mortgage industry property appraisals are employed by both the mortgage brokers and lenders to determine the value of the property.
Appraisals are done by certified individuals. Candidate Members of the Appraisal Institute of Canada (AIC) are individuals who are pursuing the AIC program of professional studies to become AACI (Accredited Appraiser Institute of Canada) or CRA (Canadian Residential Appraisal) certified title (AIC Institute of Canada).
For first-time home buyers who have limited knowledge about the mortgage industry. Mortgage brokers or the lenders requirement to have a property appraisal raises a few uncertain questions and concerns.
What happens to your Loan Amount?
The property value directly correlates with the loan amount. The mortgage approval is provided early on but hinges on a satisfactory appraisal. If the value of the property is estimated lower upon inspection, the lender will decrease the loan amount. If the value is higher can increase the loan amount if desired by the borrower (The balance). Residential appraisals have both positive and negative aspects to first-time homeowners.
Why do lenders require an Appraisal?
Lenders insist on an appraisal to determine the market value of that property. This is their way to secure their investment if the borrower defaults on the mortgage. The Lender can sell the property and retain the loan amount advanced. This process is called power of sale (The Balance). TD bank provides the borrower with reduced appraisal fees by conducting desktop appraisals. Desktop appraisals are conducted without the physical inspection of the property. This is based on tax records and multiple MLS listings (Home Appraisals Inc.). Other Lenders like MCAP provide borrowers with a rebate for their appraisal fee. First-time homeowners can expect both reduced and higher fees for appraisals depending on what lender approves their mortgage request.
Is Time a Factor in Appraisals?
Time is dependent on the borrower’s availability and the company chosen for the appraisal. A residential appraisal can be done within one day. The broker and the lender can receive the appraisal report within 48 hours. Some companies require 5 business days to inspect and complete an appraisal report depending on their requirements. For the appraisal report, it can take 2 days or even weeks depending on the appraisal company. For first-time homeowners this can be last condition before their mortgage can be advanced.
Why are Appraisal Companies Important?
The most common appraisal companies are Nationwide Appraisal Service (NAS), Solidify Values and Cross-Town Appraisal Ltd.. These companies offer an online ordering system that offers a wide range of lenders and appraisal companies. However, smaller appraisal companies do exist, they are constrained within a few regions and the prices vary. The inspection and appraisal report for these smaller companies can take weeks. First –time homeowners often ask if they can obtain a copy of the appraisal report. But this report is only provided to the lender and the broker who requested the order.
Why is Payment a factor?
The appraisal fee varies depending on the company inspecting the property. The appraisal fee ranges from $250 to $ 700+ and can increase depending on the size of the property. In most cases the borrower pays for the appraisal fee prior to the inspection of the property. However, if the lender is conducting a desktop appraisal also known as the Automated Property Valuation (APV). The fee will be disclosed on your mortgage approval under conditions and deducted from your mortgage advance. Some lenders include a disclaimer, if new information is received after the mortgage approval may void the APV and a full appraisal will be required at an additional cost to the borrower. Thus, first-time homeowners can be faced with additional costs associated with their property prior to closing.
Therefore, first-time homeowners who have limited knowledge about the mortgage industry will have many questions and concerns. The first step is finding a mortgage brokerage that offers you additional rebates along with exceptional service. Rateshop is a preferred mortgage brokerage with over 65+ lenders that offers a rebate towards appraisal fees. First-time homeowners are faced with additional costs prior to closing. Rateshop acknowledges these concerns and assists individuals in obtaining their dream home.