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What Happens During a Home Appraisal?

Getting appraisals for your home when you are buying or refinancing can be challenging. If the appraisal comes in higher or lower than the sale price, both parties will need to negotiate accordingly. Therefore, it is important to know what home appraisals consist of and what sellers can do to move the process along successfully.

If the home you want to buy appraises for less than your offer price, you may choose to:

  • Make up the price difference by finding the additional funds to pay the amount between your down payment and your loan. The seller may also agree to lower the listing price but in today’s competitive market, this is becoming more uncommon.
  • Cancel the deal if you have an appraisal contingency. If the appraised value comes in less than the agreed on purchase price, and you do not have the necessary funds to pay the difference, you may be able to get back your deposit if you have met the terms and deadlines of your offer.

During a home appraisal, a licensed appraiser conducts an inspection of the property. If you already have a loan, the lender usually orders the appraisal as they are the ones to bring the most money to the purchase. During the home appraisal, the appraiser will review ‘comps.’ Comps for a property refer to nearby, similar properties that have recently sold. This helps the appraiser to understand the local real estate market and factor it into the property value. During the property visit, the appraiser will consider the other aspects that affect property value such as the property’s condition, value-adding or detracting features, upgrades, additions and lot size. When the appraiser is finished inspecting the property and area comps, he or she will put their findings into an appraisal report. Most importantly, they will finalize the appraised home value.

If you are tasked with finding a reliable appraiser, find one that bases their opinion on a mix of experience and education and writes their report in a way that conforms to the Uniform Standards of Professional Appraisal Practices set by the Congress-approved Appraisal Foundation. It may be helpful to begin the search process at the federal government’s Appraisal Subcommittee Website, which provides links to state government websites that list state-certified appraisers. Check to ensure that their certifications are still valid and search the national registry to check if they have been a subject of any disciplinary actions. Contact the appraisers you are interested in and ask for references. You will want to select the appraiser with whom you feel the most comfortable based on references, pricing and the rapport you may have established.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. Whether you are purchasing, refinancing or in need of a home equity loan, and regardless of any credit problems, we can help you. Contact the company with the answers you need. Call us at 845-883-8200. 

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Jumbo Mortgages

A jumbo mortgage may be the best way to finance an expensive home. It is the type of mortgage loan whose principal balance is more than the loan limits for Fannie Mae and Freddie Mac, which at this time is $484,350 for a one unit property and $931,600 for a four unit property, depending upon where you live. Jumbo mortgage interest rates are competitive with more conventional loans. There are also higher limits for two to four unit properties. However, income credit score and appraisal requirements are usually stricter.

If the loan amount on a home you want to purchase exceeds the above limits, you will probably need to obtain a jumbo mortgage. Because these loans aren’t eligible to be purchased by Freddie Mac or Fannie Mae, they represent a bigger risk to lenders and have stricter requirements, including:

  • A strong credit history, which typically means a FICO credit score or 700 or higher.
  • You can get approval for a jumbo mortgage with a debt-to-income ratio as much as 45%, but the loan will often have higher reserve requirements then conforming loans.
  • With a conforming loan, you can make a smaller down payment if you obtain private mortgage insurance (PMI). You cannot do this with a jumbo loan so you will probably have a down payment requirement of at least 20%.
  • As in a conventional mortgage loan, the property’s appraisal may justify the price you’re paying for the home. However, some lenders require two appraisals as opposed to one appraisal for a jumbo mortgage loan.

The advantages of a jumbo mortgage include being able to borrow more than you could with a conventional loan, which allows you to purchase a bigger and more expensive property that you may not have been able to afford with a conventional loan. It is important to remember that there are no low down payment options. With a conventional loan, you may be able to put down a low down payment such as 3% or 5% and with an FHA loan, the down payment may be 3.5%. With a jumbo loan, you can expect your lender to require 20% or more as a down payment.

It is imperative to work with a lender that understands your needs and provides all the information you need to make a good decision. At Superior Mortgage Co., Inc., we approve 10% down up to 1.5 million with no mortgage insurance. We accept bank statements as income and we approve jumbo loans at 100% for our veterans. We work with investment properties up to 4-family with 15% down as well as loans for second homes. We also offer ARM products.

At Superior Mortgage Company, Inc., we specialize in residential and commercial loans and provide the best products and services available. Whether you are purchasing, refinancing or need a home equity loan, we can help. Choose a company that knows the best way to provide you with the information necessary to make this important decision. Contact us at 845-883-8200. 

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Home Improvement Loan Options

As we know, home improvements can make your property more efficient, comfortable, aesthetically pleasing and ultimately, more valuable. If you’re short on cash and wanting to make improvements on your home, there are several good choices for home improvement loans.

If it is a smaller project, a personal loan may be a good solution. You can use the money for anything you want such as sprinklers or a simple cosmetic improvement. The closing costs for a personal loan are low and the application process is much easier than for a home equity loan. There is no need for appraisals or other services and you do not have to put anything up as collateral. You can repay a personal loan faster than, for example, a mortgage with a 15 or 30-year repayment period. Personal loans usually have higher interest rates than home loans but if you have good credit and enough income to repay, your rate may be below 10 percent.

Home equity loans, sometimes referred to as a second mortgage, are an option when you want to borrow against the equity in your home for a bigger project. By using your home as collateral, you may qualify for lower interest rates than you would have with a personal loan. However, it is imperative that you understand that not making your payments may put your home into foreclosure. Closing costs for these loans are less costly than purchasing or refinancing loans.

Cash-out refinancing loans can also provide the funds for home improvements. A new loan that replaces your existing home loan can include some extra funds to pay for any larger improvement projects. If you choose this option, it is important to understand your loan-to-value ratio (LTV). This represents the ratio of the first mortgage line as a percentage of the total appraised value of real property. Because you are getting a brand new mortgage, closing costs can be expensive. You are also extending the life of your loan so your new monthly payments may go toward interest instead of reducing your loan balance.

Government programs can be helpful if your credit is not great or you have insufficient equity in your home. For example, an FHA Title 1 loan allows you to borrow $25,000 even if you have no equity in your home. Luxury upgrades are not permitted for this type of loan. FHA cash-out refinancing is for any type of improvement you wish to make but you will need sufficient equity to use this program. An FHA 203k is another option for refinancing but this loan limits how you can use the funds and who can do the work.

It is generally considered risky to borrow money if you have little or no equity in your home. You may wind up owing more than your home is worth if your improvements don’t sufficiently increase the home’s value. The best idea is to borrow money for home improvement projects that you are 100 percent confident will increase your home’s value and that are necessary for you and your family’s health and safety.

Superior Mortgage Company is dedicated to expanding our expertise about the mortgage industry by keeping abreast of every change, revision or new regulatory provision. We believe that an informed client is the best client. Whether you are purchasing, refinancing or in need of a home equity loan, we can help you. Contact the company that can answer all your questions. Call us at 845-883-8200. 

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