The Home Appraisal Process in Mortgage Lending

The Home Appraisal Process in Mortgage Lending

Navigating the home appraisal process is an essential step in securing a mortgage for a property purchase. Whether you are a first-time buyer or on the hunt for your subsequent home, understanding how appraisals impact the mortgage lending process can empower you to make informed decisions.

Understanding the Home Appraisal Purpose

A home appraisal is a professional assessment of a property's value conducted by a certified appraiser. It serves as a neutral evaluation that mortgage lenders require to ensure the loan amount does not exceed the property's worth. Essentially, it's a safety net for lenders and buyers alike, confirming that the agreed-upon selling price is in line with the current market conditions.

Who Orders and Pays for the Appraisal?

Typically, the lender orders the appraisal during the mortgage approval process, but it’s the borrower who usually bears the cost. This fee can be paid upfront or included in closing costs, depending on the lender's policies.

Selecting the Appraiser

Lenders have a list of certified and licensed appraisers with whom they work regularly. These professionals must be impartial and have no direct or indirect interest in the transaction to ensure an unbiased valuation.

The Appraisal Timeline

The timing of the appraisal can vary, but it generally occurs after the buyer has made an offer and the seller has accepted it, yet before finalizing the mortgage. A typical turnaround time for an appraisal report is a few days to a couple of weeks post-inspection.

What Appraisers Evaluate

Appraisers conduct a thorough inspection of the property, examining the following aspects:

- Exterior: The structure, foundation, roof, and lot size.

- Interior: The condition and age of plumbing, electrical systems, HVAC, and other significant components.

- Comparable Sales: Prices of recently sold properties with similar characteristics nearby.

- Market Trends: Current real estate market conditions impacting property values.

- Location: The neighborhood, proximity to amenities, and other location-based factors.

Appraisal Report Contents

An appraisal report typically includes detailed descriptions of the house and comparables, an evaluation of the overall real estate market in the area, issues the appraiser deems significant, and information about any issues believed to be detrimental to the value.

Reviewing the Appraisal

Upon completion, the appraiser submits the report to the lender. The lender's underwriting team reviews the appraisal to determine if the property's value supports the loan amount requested.

Dealing with a Low Appraisal

If the appraisal comes in lower than the purchase price, it can complicate the lending process. Options include renegotiating the sale price, challenging the appraisal, making up the difference in cash, or the buyer and seller meeting somewhere in the middle.

Implications of a High Appraisal

A higher-than-expected appraisal can be beneficial for a buyer as it indicates they're gaining immediate equity in the property. However, it doesn't impact the mortgage amount unless it affects the loan-to-value ratio significantly.

Appraisal Discrepancies and Disputes

Should there be discrepancies or if either party disputes the appraisal, a review can be requested. An additional appraisal may also be ordered to compare results.

Preparing for the Appraisal

Sellers can prepare for the appraisal by ensuring the property is clean and well-maintained, making necessary repairs, keeping records of all updates, and being prepared to share positive aspects of the home and neighborhood that might not be immediately apparent.


An accurate and fair appraisal is paramount for both lenders and borrowers in the mortgage lending process. It ensures the loan amount is appropriate, protects the lender's investment, and equips the buyer with the confidence that their new home investment is sound. While the appraisal can be a source of anxiety for all parties involved, knowing what to expect can demystify the process. Transparency, along with a well-maintained property and readiness to address any issues, can significantly influence the outcome. In the end, the home appraisal process is a critical checkpoint that validates the value of one of life's most significant purchases.

This article was contributed on Feb 21, 2024