October 10, 2020
5 MINUTE READ
You’re ready to refinance your home. You’ve received a quote, submitted your application and are looking forward to the closing table. But, did you overlook the appraisal and how that can impact the success of your refinance? When you’re refinancing your mortgage, everything hinges on the appraisal.
A home appraisal is a monetary evaluation of a property, performed by a third-party vendor, which is used to determine the overall fair market value of a home – or what the home should sell for on the open market.
Generally speaking, if your home’s value is too low and you’re underwater, you can’t refinance. On the other hand, if the appraisal value puts your home equity at less than 20%, you’ll need to pay private mortgage insurance or bring cash to the closing table.
Appraisals can also impact your interest rate, since lenders often consider borrowers with less equity to be riskier.
Prior to 2009, your loan officer could reach out to the local appraiser to discuss market value trends before the appraisal was completed, which allowed lenders to set expectations for target loan amounts and rates. Today, to ensure that appraisers are working independently and their evaluations are unbiased, federal rules prohibit loan offers from communicating with appraisers.
Once you understand the importance of the appraisal, it’s paramount that you prepare your home to be presented in its best light – as if you were putting it on the market for sale. Here are a few tips for preparing your home that will help ensure that your appraisal doesn’t kill your refinance.
1. The appraiser will be looking at the interior and exterior condition of your home. You should take the time to make any repairs you are aware of, big and small. Many homeowners also consider hiring a home inspector to go over the home with the owners to uncover anything that could be an issue prior to the appraisal.
2. Appraisers are also looking for improvements, such as to kitchens and baths, windows, the roof, the home’s major systems, and others. This is to determine if the home is livable and functional by today’s standards. Consider replacing your outdated tub and/or shower, and the toilet or sink. If you don’t have the budget for these major fixes, even replacing outdated wallpaper or upgrading the décor can make a significant impact.
3. When it comes to upgrading your rooms, don’t stop at the bathroom. Upgrading your kitchen can make a tremendous impact on your home’s value. If you can’t afford big-ticket renovations, consider replacing your countertops and even painting your cabinets or changing out the cabinet pulls. You’ll also want to check for simple things like leaky faucets.
4. Add a fresh coat of paint. Even just a fresh coat of paint in a neutral color can increase the value and appeal of your home.
5. Replace any stained or outdated carpeting in your home. Replacing old and outdated carpets in your home with either new carpeting or wood flooring. Not only will this improve the appraisal value of your home, it will also improve the air quality in your home and create a more modern look.
6. Add low maintenance landscaping. Planting attractive trees and shrubs can not only boost the overall curb appeal of your home, it can reinforce the fact that your home is well taken care of.
7. Focus on architectural details. Again, even if you do not have a huge budget to work with, focusing on architectural details can make a significant impact on the value of your home. Add crown molding around your ceilings, or consider adding a chair rail or molding around your walls. New baseboards can make a significant impact, as well.
8. Appraisers will also be looking at the home’s functionality, including interior room design and layout. You don’t need to tear down walls, but decluttering your home to better show its functionality is always a great idea.
9. It’s also a good idea to point out features that the appraiser might not immediately notice that could potentially add value. Did you replace your deck with composite wood? Have you taken measures to make your home more energy efficient? Did the appraiser notice that you’re on a cul-de-sac?
10. Make a list of the upgrades you’ve made to your home and have this ready for the appraiser. This will help the appraiser measure your upgrades against those of comparable properties.
In addition to looking for the things mentioned above, an appraiser is required by law to determine if your home has any health and safety issues. Are there carbon monoxide detectors? If there are bars on your windows, do they have safety latches? Are their any unpermitted additions to your home? How about mold or mildew? Be sure to address any safety and health concerns before scheduling the appraisal.
At Reali Loans, we strive to make home refinancing easy, and that means helping you understand each and every step of the process. If you have questions regarding the appraisal or how to prepare, do not hesitate to contact a member of our team today.
When you’re ready to refinance, connect with our team at Reali. We understand that everyone’s situation is unique, and we will work with you to make sure that you get the most accurate quote for your particular situation. We promise complete transparency to our clients, as well as lower costs. Click here to get your individualized quote in less than a minute!