What Happens At The Bank When An Appraisal Request Is Made For A Loan?

You have found the home of your dreams, congratulations! The paper work has been obtained and you’re hoping for a closing date soon. Your next step should be to get an appraisal in order to understand the true value of your new home, and to get a loan from the bank. So what happens when a bank requests an appraisal for a loan?

The majority of real estate appraisals are requested by mortgage companies to determine the property’s purchase price for a loan. The appraiser is your safety net against spending more on your home than it’s really worth. It’s also a safety net for the mortgage company not to lend more on a property than it’s worth.

Appraisers are there to determine a property value for its actual worth at the time of the appraisal. Appraisals protect both the lender, as well as the client, so no one overpays for a home.

According to a Yahoo article:

You will be refused a mortgage, or offered a smaller amount on the mortgage, if the appraisal falls short of the amount you wish to borrow. You will have to make up the difference with a larger down payment, or renegotiate the sale price with the seller.

So, ultimately, the appraisal is a critical factor in determining how much of a mortgage the bank or mortgage company will approve because the property you are purchasing serves as collateral for the loan.