Home Appraisals 101
You've made an offer, the sellers have accepted, and everything is progressing smoothly. Before your lender can finalize your loan, however, he/she will need to procure a home appraisal. Home appraisals don't specifically indicate how big of a loan you can qualify for, but they still play an integral part of the lending process.
What Is A Home Appraisal?
During a home appraisal, a certified home appraiser will evaluate your home to determine its current market value. Your home will be evaluated and compared according to several different criteria, depending on which appraisal method is used. With the sales comparison method, the appraiser will evaluate your home according to the...
- Sale Price of Comparable Homes (also called "comparables" or "comps")
- Size of the Lot
- Amount of Finished Square Footage
- Amount of Unfinished Square Footage
- Style of the Home
- Age of the Home
With the cost method, the appraiser will evaluate your home to determine how much it would cost to rebuild it if it were destroyed and will compare that number to the land's value and materials' depreciation.
It should be noted that although some home appraisal reports contain remarks about the condition of the home, home appraisals are not the same thing as home inspections. The sole purpose of a home appraisal is to determine the home's current market value; the purpose of a home inspection is to identify the current working order of everything in the home.
How Does The Appraisal Affect The Real Estate Process?
There are very few people who can afford to buy a home in Colorado Springs without the help of a mortgage lender. Most people rely on a lender to pay the seller outright, and then they pay the lender back over the course of fifteen or thirty years.
Understandably, most lenders do not want to pay more for a home than it is worth. Whereas the home inspection is intended to help the buyers become aware of the condition in everything the home, the home appraisal is intended to protect the lender from investing more money in a home than it is worth.
If the appraisal reveals that the home you are purchasing is worth $300,000, you will not be able to get a loan for greater than that amount, period. Your credit history, credit score, debt-to-income ratio, and other factors will influence how much of a loan you can qualify for underneath that $300,000 mark.
Questions? Give Me A Call!
Real estate in Colorado Springs can seem a little confusing at first, but there's no need to feel overwhelmed! If you have questions about buying a home in Colorado Springs, don't hesitate to give me a call.
Mike MacGuire
Colorado Springs Real Estate Agent
The MacGuire Team
6760 Corporate Dr
Ste 300
Colorado Springs, CO 80919
719-536-4324 or 719-660-6793
Mike@BuyWithMike.com
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