Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
The majority of real estate appraisals are requested by mortgage companies to validate the property's purchase price for loan purposes. Except for periods of very low interest rates when everyone is refinancing most loans are for the purchase of real estate and ordered after a sale price is negotiated. Purchasers mistakenly assume that mortgage companies are looking after their interests in the purchase transaction.
The law states that if the mortgage company orders the appraisal the appraiser is responsible only to the mortgage company. We expect mortgage companies to be prudent and they should be but being prudent is protecting their interest not necessarily the purchaser's. The mortgage company's position is:
- It has two sources of repayment: the purchaser's income and the property.
- The responsibility to repay the loan is not based upon the property's value so the purchaser is obligated to pay the note even if the property value declines to zero.
- The loan may be insured or guaranteed by a government agency.
- The government does not promise to pay the purchaser's debt if the property value is wrong.
- If the loan is greater than 80% of the value a portion of the loan may be insured by a private mortgage insurer.
- There is no decrease in risk for the purchaser regardless of the loan to value ratio. The investment by the purchaser is the same a mixture of personal cash and a loan that must be repaid.
- How to Get Approved for an FHA Loan despite Bad Credit
- Low Down Payment Loan Qualification
- 3 Common Short Sale Mistakes
- 3 Reasons Banks Reject Short Sales
- 3 Factors that Can Negatively Affect Your Mortgage Application
- Appraisal Basics
- What Lenders Don't Reveal About Home Equity Loans
- Alternatives to Getting a 2nd Mortgage
- Second Mortgages: Advantages and Disadvantages