When is a home appraisal required? - The Costa Group
In order to approve a mortgage, a lender requires an appraisal of the home being purchased. This appraisal is a guarantee for the investment. Most appraisals need to be done within three months and lenders will base the mortgage value on whichever is less: the purchase price of the property or the appraised value.
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When is a home appraisal required?

When is a home appraisal required?

In a previous blog, we explained what “appraised value” means when it comes to a home as well as how the entire process is done. This blog addresses the other side of the equation: when is this appraisal required? Remember that an appraisal is a professional estimate of the value of the property that you are hoping to purchase.  So the answer to the previous question is: always. Lenders require a home appraisal all the time before approving your mortgage as it is the way they have to protect their investments. 

Up until the beginning of last year when new mortgages rules, such as the stress test, came into play,  the market was going insane with many buyers paying way too much for a house without realizing that the lender will base the mortgage on the appraised value of the property. Many times the appraised value would be lower than the purchase value, leaving the buyer with the difficult task of finding the difference between the appraisal and the purchase price.   Lenders decide the mortgage you qualify for, it will choose the sales price or the appraised value, whichever is less. 

This scenario has since changed as we now see conditions being put in place. An appraisor looks back three months in terms of sales. Most lenders will accept an appraisal that is within the three months. Some will accept it up to six months but anything above that they won’t even bother looking at. When it comes to averaging the price of a home, the appraisal looks at the whole market and uses comparable sales. These are similar properties that have sold in the last three months.  

Don’t forget that you pay for the appraisal and the report is usually sent to the lender, although you may ask to get a copy as well.