Appraisal Ordered
The appraisal ensures the property is worth what you're paying for it. Your lender requires this independent valuation to protect their investment.
Your lender will arrange for a third party appraiser to provide an independent estimate on the value of the house you are buying.
The appraisal lets all parties involved know that the price is fair. The loan file then moves on to the mortgage underwriter.
If approved you will receive your final commitment letter that includes the final loan terms & percentage rates.
What the Appraiser Evaluates
Overall condition of the home, including age, updates, and quality of construction
Total living area, number of bedrooms and bathrooms, and usable space
Recent sales of similar homes in the area (usually within 1 mile and sold within 6 months)
Neighborhood, lot size, view, proximity to amenities and schools
Upgrades, special features, garage, pool, deck, or other value-adding elements
Current real estate market trends, supply and demand in the area
Possible Appraisal Outcomes
Appraises at or Above Purchase Price
Great news! The property is worth what you're paying (or more). The loan process continues smoothly toward closing.
Appraises Below Purchase Price
This creates a gap that needs to be addressed. Options include:
- •Renegotiate the price with the seller to match the appraised value
- •Increase your down payment to cover the difference
- •Meet in the middle - split the difference with the seller
- •Order a second appraisal (if you believe the first was inaccurate)
- •Walk away from the deal if negotiations fail
Property Title Search
This ensures that the seller truly owns the property, and that all existing liens, loans or judgments are disclosed.
The title company will search public records to verify:
- •The seller has legal right to sell the property
- •There are no outstanding liens or claims against the property
- •There are no boundary disputes or easement issues
- •All previous transfers of ownership were legitimate
Homeowner's Insurance
You'll need insurance for the new home prior to closing. This will protect against things like fire, storms and flooding.
What to Shop For:
- •Coverage amount - Should cover full replacement cost of the home
- •Deductible - How much you pay out of pocket before insurance kicks in
- •Liability coverage - Protects you if someone is injured on your property
- •Personal property coverage - Covers your belongings
- •Additional riders - For valuables, flood insurance (Oklahoma!), etc.
Pro Tip: Get quotes from multiple insurance companies to find the best coverage at the best price. Your lender will require proof of insurance before closing.