After a home appraisal, the mortgage underwriting process begins, typically taking 30-45 days until closing. The appraisal results determine whether the transaction proceeds smoothly, requires renegotiation, or needs additional buyer funds, with three primary outcomes affecting both buyers and sellers.

Possible appraisal outcomes and next steps:

• Appraisal meets/exceeds contract price: Loan proceeds to underwriting, closing moves forward as planned
• Appraisal below contract price: Buyer must bridge gap with cash, renegotiate price, or dispute appraisal
• Conditional approval: Underwriter requests additional documentation before final approval
• Appraisal rejection: Major property issues require resolution or deal termination

The post-appraisal timeline (30-45 days):

1. Days 1-3: Lender receives appraisal report, reviews findings
2. Days 4-14: Mortgage underwriting begins, documents verified
3. Days 15-25: Underwriter evaluates creditworthiness, debt-to-income ratios
4. Days 26-35: Address any conditions, finalize loan terms
5. Days 36-45: Schedule closing, final walkthrough, sign documents

Key underwriting factors reviewed:

• Credit history and score verification
• Debt-to-income ratio analysis (typically max 43-45%)
• Employment and income verification
• Asset documentation and down payment sources
• Property title and insurance clearance

Actions buyers should take:

• Maintain stable employment and finances
• Avoid major purchases or new credit applications
• Respond promptly to underwriter requests
• Prepare funds for closing costs (2-5% of purchase price)
• Review loan documents thoroughly before closing

This guide covers: Detailed explanation of each appraisal outcome, navigating underwriting conditions, timeline variations by loan type, common delays and solutions, and step-by-step closing procedures.

What Is a Home Appraisal?

A home appraisal is crucial for determining the value of a property. It provides an unbiased assessment needed when buying, selling, or refinancing a home through a mortgage.

Qualified appraisers, licensed or certified, assess the home based on its condition, location, market trends, and recent sales of comparable properties. They conduct a thorough inspection of the home’s interior and exterior, evaluating its appearance, layout, square footage, need for repairs, and amenities. The resulting report includes photos, market data, and other relevant details.

For Buyers: How It Works

During the closing process, lenders order the appraisal, with the borrower covering the fee. The appraisal impacts the mortgage application; if it values the home lower than the contract price, it can affect loan approval. Lenders aim to match the loan amount with the home’s value to mitigate financial risk.

A lower-than-expected appraisal can benefit buyers by preventing overpayment and potentially opening negotiation opportunities.

For Sellers: How It Works

Sellers also depend on appraisals to ensure they receive fair market value for their homes. Cash buyers bypass this step, but their offers aren’t guaranteed. If a seller suspects bias in the appraisal, seeking a second opinion is an option. Understanding local market conditions, like distressed sales, can also influence a home’s appraised value.

What is the typical duration of an appraisal?

Typically, the appraisal process lasts 7-10 days. The on-site inspection lasts 1-2 hours, but appraisers also analyze data, make comparisons, and prepare reports. The timeline for receiving the appraisal report varies based on complexity and workload.

What Happens After the Home Appraisal?

Many homebuyers are curious about the outcome if a house doesn’t appraise at the expected value. If the appraised value is lower than the contract price, you have a few options. You can bridge the gap with additional cash, negotiate with the seller for a price adjustment, or dispute the appraisal if you suspect any unfair assessment.

On the other hand, if the home appraises at or above the contract price, the mortgage process proceeds smoothly. The next critical step is mortgage underwriting, where all loan documents are meticulously reviewed and conditions are finalized.

Understanding Mortgage Underwriting

The underwriter plays a pivotal role in assessing the loan application. Their task is to ensure that all submitted documents are in order and to evaluate the borrower’s creditworthiness. Factors such as credit history, debt-to-income ratio, and financial background are carefully scrutinized to determine the loan’s risk level for the lender.

Navigating Underwriting Conditions

While many loans are approved without issue, some may come with conditions that need addressing. Conditional approval means there are specific items or concerns that must be resolved or clarified before final approval.

Timeframe from Appraisal to Closing

The mortgage underwriting process and subsequent closing procedures typically span from a few weeks to up to 45 days. On average, borrowers are advised to anticipate a 30-45 day period to complete all necessary processing. Once you reach the closing stage, you’ll sign the required documents, address any queries with the lender, settle closing costs, and receive the keys to your new home.

What Factors Contribute To A Lower Home Appraisal?

Factors influencing home appraisals often include elements beyond your influence, like nearby traffic or neighborhood characteristics. However, sellers can proactively prepare for appraisals by presenting a well-maintained and inviting home, improving curb appeal, ensuring all repairs and upkeep are up-to-date, and taking any steps to enhance the overall appeal of their property.

Conclusion

Navigating through appraisals during the home buying or selling journey can feel tense, but they typically proceed smoothly. Once the appraisal wraps up, borrowers enter the final phase of securing their mortgage. It’s crucial at this stage to maintain clear communication with your lender, promptly respond to any queries from the underwriter, and avoid significant transactions or withdrawals that might catch the underwriter’s attention.

Frequently Asked Questions

1. What happens if the home doesn’t appraise at the expected value?

• If the appraised value of the home is lower than the contract price, several options are available:
  • Bridge the gap with additional cash.
  • Negotiate with the seller for a price adjustment.
  • Dispute the appraisal if there are suspicions of unfair assessment.

2. What role does the appraisal play for buyers and sellers?

• For buyers, the appraisal impacts the mortgage application process. If the appraised value is lower than the contract price, it may affect loan approval and provide an opportunity for negotiation. Sellers rely on appraisals to ensure they receive fair market value for their homes, helping them understand the current market conditions and potentially negotiate sales terms.

3. What is mortgage underwriting, and how does it relate to the appraisal?

• Mortgage underwriting occurs after the appraisal process. It involves a thorough review of the loan application, documents, and borrower’s financial background to assess the risk level for the lender. The appraisal helps determine the property’s value, which is crucial for finalizing the loan amount and terms.

4. What factors can contribute to a lower home appraisal?

• Several factors can influence a lower appraisal value, including:
  • Property condition and maintenance issues.
  • Market trends and comparable sales data.
  • Location factors such as nearby traffic or neighborhood characteristics.

5. How long does it take from the appraisal to closing?

• The timeframe from the appraisal to closing can vary but typically ranges from a few weeks to up to 45 days. This period includes mortgage underwriting, finalizing loan conditions, addressing any outstanding issues, and completing the necessary paperwork before closing on the property.