Advertiser Disclosure

Mortgage

Should You Borrow Money for a Down Payment on a Home?

Editorial Note: Parts of this article were reviewed by a lender to ensure accuracy prior to publication. The overall conclusions, recommendations and opinions are the author's alone.

iStock

Homeownership is an exciting prospect, but even if you can afford the monthly mortgage payments, coming up with a down payment can be a big obstacle. That’s especially true if you want to put down 20% to avoid paying extra for private mortgage insurance (PMI), which many lenders require as protection against default.A down payment, though, certainly isn’t cheap. A 20% down payment on a $300,000 home would mean you’d need $60,000 in cash. Even a modest 5% down payment still means coming up with $15,000 in upfront cash. Plus, that doesn’t include the other costs associated with buying a home like closing costs, attorney fees, escrow and more. It may make sense to borrow money for a down payment because it can up your chances at getting a mortgage, lower your monthly mortgage payments and cost you less in interest over time.

And if you can get to 20% and avoid having to pay for PMI, even better. PMI payments can equal 0.5% to 1% of the entire loan amount, and you have to pay PMI until you reach at least 20% equity in your home, which could take years. Let’s say you have a $250,000 mortgage and have to pay PMI because your down payment was 10%. At the high end of PMI costs (1%), you would pay $2,500 a year, or roughly $208 a month, for PMI.

So should you borrow money from sources like a bank, family member or your 401(k) for a down payment? The will depend on how much interest you’ll be charged, whether borrowing would allow you to avoid paying PMI and how it helps or hurts your chances at being approved for a mortgage.

Here is a look at several options, and their pros and cons, for borrowing money for a down payment.

How to borrow money for a down payment

Borrowing against equity you have in an existing property

If you already own a home, you may be able to borrow against the equity in your current home to buy a new one with a home equity loan or home equity line of credit (HELOC). A home equity loan gives the borrower a lump-sum amount of money upfront, usually with a fixed interest rate. A home equity line of credit (HELOC), meanwhile, gives you access to funds you can draw on as needed. With a HELOC, you only pay interest on what you borrow; most come with variable interest rates.

Pros:

  • Because these loans are secured, with your home as collateral, they usually have lower interest rates.
  • If you borrow enough to reach a 20% down payment, you can avoid PMI.

Cons:

  • Your house is the collateral for the loan, so if you can’t make your payments, you risk losing your home to foreclosure.
  • If it takes longer than expected to sell your home, you may be making two monthly loan payments for a while.
  • Some home equity loans or HELOCs charge prepayment fees if you pay off the loan early.

Borrowing from friends/family

The major benefit of borrowing money from a friend or relative is potentially paying lower interest, having more flexibility in repayment and not having to meet the loan requirements of a traditional lender. If the down payment is a gift, not a loan, most lenders require that it come from a family member and that they provide a letter designating the money as a gift. The IRS allows each person to gift, tax-free, $15,000 a year to one person. A married couple, though, could each give $15,000 to a child every year. If the money is borrowed, it will count as a debt.

Pros:

  • You might be able to get more favorable borrowing terms like lower interest rates.
  • The process should be quicker and easier than most other loan options.

Cons:

  • You risk harming your relationship if you don’t repay the loan or meet the agreement, or if expectations change on either side.

Taking out a 401(k) loan

You may be able to take a loan from your 401(k) for a down payment. Because this is a loan and not a withdrawal, you won’t be hit with the 10% early withdrawal penalty if you’re younger than age 59 ½. However, that penalty kicks in if you default on the loan. The IRS allows you to borrow up to 50% of your vested account balance, or $50,000, whichever is less. For first-time homebuyers, there is also the possibility of withdrawing up to $10,000 for certain approved “hardship” expenses (including buying a home) from some 401(k)s and traditional individual retirement accounts (IRAs) without penalty. If you’re not a first-time homebuyer, then the 10% penalty would apply.

Pros:

  • With a 401(k) loan, you’re using your own money for the down payment, so you’re really just paying back yourself, with interest.
  • If you’re an eligible first-time homebuyer, you can withdraw up to $10,000 from some 401(k) or traditional IRA plans without penalty.

Cons:

  • If you lose your job before you pay off the loan, you’ll have to repay the whole amount by the next tax-filing deadline.
  • If you default on the loan, you’ll be charged a 10% penalty by the IRS, and you’ll be taxed on the remaining balance.

Taking out a personal loan

Personal loans can be used for almost any purpose, are repaid with principal and interest, and usually don’t require collateral. However, they’re not commonly used for down payments because having another loan won’t be appealing to a lender when you apply for a mortgage.

Pros:

  • They often have a faster approval time than other conventional loans.
  • They usually have fixed interest rates, long terms and lower interest rates than credit cards.
  • They can be used to consolidate higher-interest debt, which could improve your finances before you apply for a mortgage.

Cons:

  • A personal loan affects your debt-to-income (DTI) ratio, which could hurt your chances of getting a mortgage.
  • You’ll need to make monthly repayments in addition to future mortgage payments.
  • A lender could react negatively if you plan to use a personal loan for most or all of your down payment because they like you to have skin (i.e., your own money) in the game.

Getting a loan from a community bank or credit union

Community banks and credit unions have similar loan products to big banks, but they often have better interest rates. Credit unions are nonprofit, so they can afford to have lower fees and interest rates. And both credit unions and community banks may be able to offer more flexibility around approval requirements like credit scores and income levels.

Pros:

  • You may be able to get fast financing at a good interest rate that allows you to make a down payment.

Cons:

  • You’ll be paying interest and principal on a loan as well as any relevant fees.
  • Having more debt could hurt your chances of getting a mortgage.

Grants/assistance programs

There are several federal, state and local grant or assistance programs to help people buy homes. Some programs are specifically targeted at helping with down payments and/or closing costs. You can search for programs by state on the U.S. Department of Housing and Urban Development’s (HUD) website.

The National Homebuyers Fund is one organization that offers down payment or closing cost funds of up to 5% of the amount of the loan. The funds come in the form of a zero-interest gift or a second mortgage that is forgiven after three years.

Then there are federal government-backed programs that allow eligible buyers to put down lower down payments, such as the Federal Housing Authority (FHA), the U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA).

The FHA’s loans allow buyers to provide down payments as low as 3.5%. With VA loans, eligible buyers may be able to get a loan without needing a down payment at all, depending on how much they want to borrow. The USDA, likewise, offers various lending programs that help reduce the costs of buying a home, including the Section 502 Direct Loan Program for low- and very low-income applicants in rural areas, which doesn’t require a down payment.

Pros:

  • Assistance programs can lower, or even eliminate, the need for a down payment.
  • Although credit history and other factors still matter, borrowers may be more likely to get a loan that is backed by the government because that factor takes away some of the risk for the lender.

Cons:

  • If someone uses a loan from the FHA to make a smaller down payment, he or she may need to take out PMI until they reach 20% equity.
  • Putting down a smaller down payment also demands taking out a larger mortgage to buy the home.

Conclusion

Homeownership is a big step, and there are plenty of options to help you come up with the money for a down payment. Even if you have enough cash to put down 20%, you might not want to do so if that means cleaning out your savings.

Avoiding paying PMI, though, can save you thousands of dollars, so it can make financial sense to borrow enough for a 20% down payment if you’re close. Having a larger down payment can also help you get a mortgage and will mean smaller monthly payments. So weigh your options, such as borrowing from friends or family, taking out a loan from a bank or credit union, taking a loan from your 401(k) or borrowing against equity in your current home.

If you don’t have much cash for a down payment, it’s also worth looking into grants and down payment assistance programs that can reduce the amount you need for a down payment or even eliminate the requirement for one altogether.

The important thing is that you can afford whatever borrowing option you choose. Make sure you can financially handle paying off both a down payment loan and a future mortgage. Also, be sure that the option you choose will help you get into a home more quickly and easily, instead of counting against you.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jennifer Thomas
Jennifer Thomas |

Jennifer Thomas is a writer at MagnifyMoney. You can email Jennifer here

Compare Mortgage Loan Offers for Free

Home Purchase Quotes

Home Refinance Quotes

(It only takes 3 minutes!)

NMLS #1136 Terms & Conditions Apply

Advertiser Disclosure

Mortgage

How to Speed Up Your Mortgage Refinance

Editorial Note: Parts of this article were reviewed by a lender to ensure accuracy prior to publication. The overall conclusions, recommendations and opinions are the author's alone.

The saying “time is money” is even more true when you’re refinancing your home to reduce your monthly payment. The sooner you complete a refinance, the sooner you’ll be able to enjoy the benefits of lowering your payment and improving your financial situation.

There are steps you can take to move the process along more quickly. We’ll discuss these as we explain how to speed up your refinance.

Why speed is important in a refinance

Interest rates change on a daily basis. Once you lock in your rate, the clock begins ticking. If you don’t complete the refinance within the lock timeline, you could end up paying extension fees or end up having to re-lock at a higher rate.

Rate locks are usually priced in 15-day increments, although different lenders may offer other timelines. The shorter the lock period, the better your rate should be. If you can complete your refinance within one of the shorter lock-in periods, you’ll end up with a lower rate, lower costs or both.

Tip No. 1: Know what you want to accomplish with the refinance

If you’re objective is to save money every month on your payment, the refinance process can be incredibly fast. The simpler your goal is for the refinance, the easier it will be for the lender to approve your loan.

If a lender sees that you’re saving money and improving your financial situation with a lower down payment — and that you have made all your payments on time — it already has a pretty good idea that you’ll make a new lower payment on time.

However, if you’re applying for a cash-out refinance to consolidate debt, that may be a red flag that you are overextended on credit because your job or income is unstable, prompting lenders to request more proof of income to make sure you can repay your loan.

Tip No. 2: Pick a streamline refinance option

One of the benefits of government-backed loan programs, such as those offered through the Federal Housing Administration (FHA) and Veteran Affairs (VA), is the ability to refinance under “streamlined” guidelines. These refinance programs don’t require any income verification, and they usually won’t require any appraisal.

They also don’t require a full credit report, and they only verify that you’ve made your current mortgage payments on time with a mortgage-only credit report. Because lenders don’t have to underwrite your income or an appraisal, the refinances can be completed very quickly.

If you have an FHA or VA loan and have made seven payments on time since you took out your mortgage, you are probably eligible for a streamline refinance option. The VA streamline program is more commonly called a VA Interest Rate Reduction Refinance loan (IRRRL), but it features the same income and appraisal flexibilities as the FHA streamline refinance.

Tip No. 3: See if you can get an appraisal waiver on conventional financing

When market values go up — as they consistently have for at least the past five years — conventional lenders may begin to offer appraisal waivers. Although you’ll still need to document your income and assets, conventional lenders may be able to offer you a waiver of your appraisal, which will significantly speed up your refinance process. It will also save you the cost of an appraisal, which is usually $300 to $400.

You may hear your loan officer talk about a property inspection waiver (PIW) or an automated collateral evaluation (ACE). These basically amount to a computerized system accepting the estimated value you input on your loan application as the appraised value for your refinance.

Appraisal waivers are usually only available on rate-and-term refinances, which are refinances paying off the balance of your loan to save money. If you are looking for a cash-out refinance to consolidate bills or make home improvements, chances are you’ll need a full appraisal.

Tip No. 4: Fill out an accurate and complete application

Take the time to fill out your loan application accurately. Be sure to provide contact information for your employer, your homeowners insurance company and a complete two-year history of your employment and addresses.

If you’ve applied for new credit accounts in the past 60 days, have a current statement handy in case the balance and payment haven’t yet appeared on your credit report. These may seem like minor things, but they can cause major delays if you don’t disclose them properly at the beginning of the loan process.

Tip No. 5: Have your basic paperwork ready to provide

Depending on the type of refinance for which you are applying, there may be very little your lender needs. However, there are some basics you should have handy to speed up the process, just in case.

  • Current month of pay stubs: If you aren’t doing a streamlined government refinance, this is usually the bare minimum a conventional lender will need.
  • Last year’s W-2: If you have high credit scores (above 720), you may not have to provide a W-2, but it depends on the type of income you receive. If you get overtime and commissions on top of a base salary, expect to provide two years’ worth of W-2s.
  • Current mortgage statement: This is needed to show that there are no late fees accruing. It also provides a snapshot of your current loan balance for your loan estimate preparation.
  • Two months of bank statements from a checking or savings account: Some lenders will only require one month. If you’re adding the closing costs to your loan balance, you may not need any bank statements at all.
  • Copy of your current homeowners insurance policy: Whether you include your homeowners insurance in your monthly payment or not, the lender will need this to calculate your total qualifying payment. It will also need to switch the lender information to show who your new mortgage company will be.
  • Current property tax statement: Again, this is required regardless of whether you have an escrow account. Your property taxes will need to be current, and the lender will need the yearly taxes to calculate your total qualifying payment.
  • Copy of your driver’s license or picture ID: This is needed to confirm your identity at your application and then again at your closing.

Tip No. 6: Apply with a digital or online refinance lender

You may see advertising or have a loan officer tell you about a digital or online refinance process. This generally means the lender doesn’t need any income or asset documentation to approve your loan, allowing the refinance to finished quickly.

That doesn’t mean they aren’t accessing your personal information in another way. New technology allows lenders to access your income and employment history through online databases. It can see your assets with “view-only access” to your banking accounts.

You generally have to work for a large employer to be eligible, and your bank accounts need to be with a large bank. You also need to be comfortable with giving your lender your log-in credentials for your bank for “read-only” access.

Tip No. 7: Stay at your current job

Your income and employment will be verified during the loan process and right before closing. Switching from a salaried to a commission position, or changing employers, will create delays in the process or prevent you from being able to complete the refinance at all.

Tip No. 8: Don’t make large deposits into your checking or savings accounts

If you are increasing your loan amount to cover your costs, you may not need to provide any bank statements at all. If you do need to provide bank statements, the first thing the lender will look for is large deposits.

If you received a large cash gift from a relative, or recently sold an asset such as a car or coin collection, avoid depositing the funds until after your transaction is complete to avoid having to provide documentation and explanations.

Tip No. 9: Provide only asset documentation you need for the loan

Refinance lenders only need enough documentation to approve your loan. If you have an extensive portfolio of stock funds, 401(k) plans or several different asset accounts, you don’t need to disclose them if you aren’t going to be liquidating them to complete your refinance.

Tip No. 10: Communicate any changes to your loan officer immediately

Sometimes a new job opportunity is too good to pass up, or a car breaks down requiring you to buy a new one. The most important thing is to immediately notify your loan officer of any changes to your employment, credit or assets so they can develop a game plan to prevent any unnecessary delays finishing your refinance.

Things that could slow down the refinance process

Sometimes situations can arise that you have no control over in the refinance process. You’ll need to make quick decisions to keep the refinance moving if you run into any of them.

Your appraisal comes in lower than estimated

A low appraisal could affect the viability of a refinance. This is especially true with conventional mortgages, where the interest rates are influenced by how much equity you have. Even a 5% difference in your estimated value could result in a higher rate, higher costs or both.

You can also dispute a home appraisal by providing recent, similar sales you think better represent your home’s value. If your value comes in lower, reach out to your loan officer to have a new break-even point analysis done to make sure the refinance still make sense. This calculation divides the total closing cost of your refinance by the monthly savings to determine how long it takes to recoup the costs. Getting your refinance done quickly isn’t beneficial if it takes you longer to recoup the costs than you plan to live in the home.

One caveat: Don’t give the appraiser your opinion about what you think your home is worth. There are very strict laws in place to make sure appraisers have the independence to evaluate your home’s worth without any pressure from an interested party. An appraiser can refuse to complete your appraisal, creating delays and potentially causing the lender to decline your loan.

Some states consider it a felony to influence a home appraiser, so it’s best to let the appraiser do the inspection, then dispute the value with recent sales if you don’t agree with the appraiser’s opinion.

You have a second mortgage you want to keep

If you have a home equity loan or a home equity line of credit (HELOC), you may want to keep it open and just refinance your first mortgage. This will require an extra approval process called “subordination” or “resubordination.”

Your second mortgage lender will need to agree to being “subordinate” to your new first mortgage. That means your first mortgage lender wants to have first rights to foreclose on your home if you default.

Home equity loan and HELOC lenders will usually have a process in place to approve subordinations quickly, but some have long turn times that may force you to lock in your mortgage for a longer time period.

Final thoughts about speeding up your refinance

Be sure to shop around to get the best rate possible. Once you’ve found your best deal, lock it in and be prepared to act quickly with any documentation requests from your loan officer and loan processor.

Taking all these steps will help speed your refinance up so that you can begin enjoying the benefits of a lower rate and monthly payment.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Denny Ceizyk
Denny Ceizyk |

Denny Ceizyk is a writer at MagnifyMoney. You can email Denny here

Compare Mortgage Loan Offers for Free

Home Purchase Quotes

Home Refinance Quotes

(It only takes 3 minutes!)

NMLS #1136 Terms & Conditions Apply

Advertiser Disclosure

Mortgage

Guide to Home Appraisals for Mortgages

Editorial Note: Parts of this article were reviewed by a lender to ensure accuracy prior to publication. The overall conclusions, recommendations and opinions are the author's alone.

There are many factors that can lead to a mortgage denial when you’re trying to buy a home. One of the most common things that can stand between you and an approval is an issue with the property’s appraisal.

But what is an appraisal? And why do home appraisals matter so much during the home buying process? This guide answers those questions and more.

What is a home appraisal?

An appraisal is a written estimate that details a professional appraiser’s opinion of a home’s value. When you buy a home, your mortgage lender will more than likely require a home appraisal before approving the loan.

“Appraisers are reporters of the market,” said Stephen Wagner, 2019 president of the Appraisal Institute in Chicago. “They interpret the actions of buyers and sellers in the marketplace.”

All 50 states require appraisers to be certified or licensed to provide appraisals to mortgage lenders who are federally regulated, according to the Appraisal Institute. Appraisers receive their credentials after passing an examination administered by their state’s appraisal board.

When choosing an appraiser, government-sponsored enterprise Fannie Mae has specific requirements for mortgage lenders. They need to select from professionals who not only meet the certification or licensing requirements, but also have experience in and knowledge of the local real estate market and the specific property type being appraised.

Many appraisers use the Uniform Residential Appraisal Report, the most common form used in real estate appraisals.

What do appraisers look for?

Before visiting a property, an appraiser gathers upfront information related to the property. Once they begin the appraisal assignment, they typically review the property’s:

  • Amenities
  • Condition
  • Interior
  • Structure
  • Upgrades

But not all appraisal assignments look the same, said John Brenan, vice president of appraisal issues with The Appraisal Foundation in Washington, D.C.: “Some require an appraiser to personally inspect the interior of a home. Some only require an appraiser to personally inspect the exterior of the home.”

The homebuyer doesn’t have to be present for the appraisal. In many cases, a real estate agent will provide access to the home if necessary, he added.

The U.S. Department of Housing and Urban Development (HUD) requires appraisals for FHA loans to be more in-depth than those for conventional loans. Appraisers hired by FHA lenders must establish an unbiased opinion of a home’s value and determine whether it meets the FHA’s minimum property standards — by inspecting the home’s foundation and major systems, for example.

The U.S. Department of Veterans Affairs follows a similar process for VA home appraisals. The appraiser must determine the value of the home and review the property’s condition to assess whether it meets the VA’s minimum property requirements.

Appraisers typically determine a home’s value by using one of three common methods:

  • The sales comparison approach, which involves reviewing recent home sales and homes currently for sale that are similar to the property being appraised. The appraiser makes adjustments to the home’s value based on its condition, features and quality.
  • The cost approach, which involves calculating what it would cost to build that same house on a similar lot, minus depreciation. This method can be helpful for appraisals on relatively newer homes, according to Brenan.
  • The income approach, which involves taking the rental income of the property being appraised, or a comparable property, to determine a value that would provide the rate of return that the typical investor would require for a similar home. As Brenan noted, this approach is typically used for commercial property appraisals.

The most commonly used method for real estate transactions is the sales comparison approach. When using this approach, appraisers consider several factors, according to the Appraisal Institute, which include:

  • Conditions of the sale
  • Economic characteristics
  • Expenditures made immediately after the purchase
  • Financing terms
  • Location
  • Market conditions
  • Non-property components of value
  • Physical characteristics
  • Property rights being transferred
  • Use and zoning

Homebuyers usually pay for an appraisal as part of their closing costs. An appraisal fee can run about $300 to $400, but it can vary depending on the state, property type, loan type and the complexity of the appraisal assignment. For example, the VA has a state-by-state fee schedule for home appraisals. The appraisal fee is $450 in Georgia and $525 in New York.

There isn’t a “shelf life” on appraisals, Brenan said. However, each lender has guidelines it follows that dictate how old an appraisal report can be for mortgage lending purposes.

Why appraisals matter to the homebuying process

An appraisal establishes a home’s value. This number is important to your mortgage lender because it affects the loan you need to purchase the home.

Lenders rely on a house appraisal to determine whether the sales price makes sense and to calculate the homebuyer’s loan-to-value ratio.

[An appraisal], as described by Wagner, “is a risk mitigation tool at that point, to make sure that somebody’s not paying too much for a property or that the lender isn’t going to lend too much against the property.

Put another way, a home appraisal is designed to ensure that the collateral for a mortgage — the house — is adequate enough to justify the loan amount, Brenan said. The appraisal also helps establish value in the event of a foreclosure sale, should the lender need to take the property back because the borrower defaulted on the mortgage.

Aside from mortgage approval, other reasons you might need an appraisal include:

Can you skip a home appraisal?

In certain circumstances, you may be able to sidestep the home appraisal requirement when getting a mortgage to purchase a home.

Conventional mortgage borrowers may be able to get what’s called a property inspection waiver (PIW) mortgage, which is a loan that goes through the underwriting process without an appraisal. It’s also known as an appraisal waiver mortgage.

With a PIW mortgage, the lender can use existing information about the property’s estimated value to originate a loan, rather than ordering a new appraisal. However, the homebuyer would need to supply a 20% down payment in most cases.

How to dispute a home appraisal

An appraiser’s opinion of value isn’t necessarily the end of the line, Brenan said.

If you’re not happy with your appraisal — for example, the home value comes in lower than expected — you have the option to dispute the appraiser’s findings.

Let’s say you’re looking to buy a home priced at $300,000 but the appraisal comes in at $250,000. After your lender has given you a copy of the appraisal report to review, you can request another appraisal if you’re not satisfied with the results. It’s helpful to provide any evidence you may have that disputes the appraiser’s findings, such as a recent comparable sale or missing square footage.

Keep in mind that your lender isn’t obligated to honor your request. But if it does, you’ll be responsible for the additional appraisal fee.

“If the borrower or a real estate agent or whoever wants the appraiser to consider additional information, go through the lender, share that information,” Brenan said. “The appraiser will review it and notify the lender if it warrants any type of change.”

If your lender decides to stick with the original appraisal or no changes occur after it’s reviewed, a few things can happen. Using the example above of an appraisal coming in lower than the sales price, you would either need to come up with the difference in cash or renegotiate with the seller on a lower price. Otherwise, the loan could be denied.

It’s also important to remember that although a house appraisal is part of your homebuying process and you’re responsible for paying the fee, you aren’t the appraiser’s client. In terms of a home purchase or refinance, the lender is required to order the appraisal and can’t accept an appraisal ordered by a borrower — “that is to avoid any possible bias or undue influence,” Brenan said.

Home appraisal vs. home inspection

While they both involve taking a critical look at a home, an appraisal and inspection aren’t the same.

An appraisal examines the elements and features that help determine the value of a home. But an inspection evaluates the home’s structure, interior and exterior to assess its condition and recommend any necessary repairs. Unlike appraisals in most cases, home inspections can be optional. Inspection fees range from about $300 to $500, though it can change based on a number of factors, such as the size and age of the home.

An appraiser is generally looking for things that impact value, such as the quality, design and floor plan, Wagner said.

“Appraisers do not inspect properties to the depth and level that a home inspector might, wherein as a home inspector is … testing plumbing and electrical and kind of almost seeing behind the walls, if you will,” he explained.

The bottom line

A home appraisal provides benefits for both homebuyers and mortgage lenders, Wagner said.

“In addition to valuation issues, they may find out things about the property that they might not have otherwise been particularly aware of,” he said.

For example, a home could be advertised as a certain size, but the appraisal showed that it’s actually smaller or larger than marketed.

“There’s a number of aspects of the physical characteristics of a property that may come to light that were not obvious to the buyer at the outset,” he said.

Lastly, since an appraiser is analyzing market information to arrive at a home’s value, there’s not much of a need to worry about bias.

“The appraiser is the independent, impartial, objective party in the entire transaction,” Brenan said. “The appraiser is the only one whose compensation does not depend on whether the deal goes through or not.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

Compare Mortgage Loan Offers for Free

Home Purchase Quotes

Home Refinance Quotes

(It only takes 3 minutes!)

NMLS #1136 Terms & Conditions Apply