You've completed the mortgage application now it's time to move onto the next step. Your mortgage lender will order an appraisal in compliance with the Home Valuation Code of Conduct (HVCC). The HVCC dictates the appraisal report must be ordered through a third-party management company. This policy also restricts any communication between your loan officer and the appraiser.
Your financing is going to be predicated on the appraised value. This means that either the appraised value or purchase price will be used as the benchmark to determine the maximum loan amount.
As an example, if you make an offer to purchase a home at $100,000 using FHA financing your maximum loan amount would be $96,500. This assumes that the home will appraise for $100,000.
However, if the appraiser determines the value to be $95,000, then the maximum loan amount would be $91,675.
So what happens in this situation is either:
1.The seller reduces the purchase price to $95,000
2.The buyer borrows $91,675 and pays $8325 to close the transaction
3.The buyer and seller renegotiate the terms of the sale and compromise somewhere in the middle
For more information about purchasing a home please review the previous posted articles. For information regarding your specific situation please contact your licensed mortgage professional.
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The opinions and general information in this blog are soley those of Kathy Sheehan. Specifics regarding an individual case should be discussed in detail with a loan professional. For a confidential consultation, please feel free to contact me via phone or email. All terms and conditions are subject to change.