Does the appraisal have to be complete for underwriting?

When applying for a mortgage, one essential step in the process is the appraisal. An appraisal is an unbiased estimate of the value of a property conducted by a licensed or certified professional. It is a crucial piece of information for both the borrower and the lender to determine the fair market value of the property. However, does the appraisal need to be complete before underwriting can begin?

**The appraisal does not have to be complete for underwriting to start.**

Underwriters can begin their review of the loan file based on other documents such as the borrower’s financial information, credit score, employment history, and property details. However, the appraisal report plays a significant role in the underwriting process as it provides the lender with a third-party evaluation of the property’s value. Once the appraisal report is completed, the underwriter will use it to ensure that the loan amount aligns with the property’s appraised value.

FAQs:

1. Is the appraisal always required for a mortgage?

Yes, most lenders will require an appraisal to assess the value of the property being used as collateral for the loan.

2. Can underwriting be completed without an appraisal?

While underwriting can begin without the appraisal, it is a crucial component of the process and must be completed before final approval.

3. What happens if the appraisal value is lower than the purchase price?

If the appraisal comes in lower than the purchase price, the lender may require the borrower to make up the difference, negotiate the purchase price with the seller, or withdraw the loan application.

4. How long does an appraisal take to complete?

The appraisal process can take anywhere from a few days to a few weeks, depending on factors such as the property’s location, size, and condition.

5. Who pays for the appraisal?

Typically, the borrower is responsible for paying for the appraisal, which can cost anywhere from a few hundred to over a thousand dollars.

6. What if I disagree with the appraisal value?

If you believe the appraisal value is inaccurate, you can request a review or challenge the appraisal with additional information or comparable sales data.

7. Can the underwriter order a second appraisal?

In some cases where there are discrepancies or concerns with the initial appraisal report, the underwriter may request a second appraisal for further evaluation.

8. How does the appraisal affect the loan-to-value ratio?

The appraisal value is used to calculate the loan-to-value ratio, which is the percentage of the loan amount compared to the property’s appraised value. A lower appraisal value may result in a higher loan-to-value ratio.

9. Are there different types of appraisals?

Yes, there are different types of appraisals, such as drive-by appraisals, desktop appraisals, and full appraisals, each varying in the level of detail and thoroughness.

10. Can the borrower choose the appraiser?

No, the lender is responsible for selecting an appraiser to ensure the appraisal is unbiased and meets regulatory guidelines.

11. What does the appraiser look for during the appraisal process?

The appraiser evaluates various factors such as the property’s condition, location, size, amenities, recent sales in the area, and any improvements or renovations.

12. Can I use a previous appraisal for a new loan application?

In some cases, a previous appraisal may be used if it is recent and meets the lender’s requirements. However, the lender may still require a new appraisal for accuracy and compliance.

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