What is an appraisal?
An appraisal is an unbiased estimate of a home’s true or fair market value. An appraisal is used to determine whether the home's purchase price is appropriate given the home's condition, location, and features.
The appraisal process and how appraisal values are determined
In order to proceed with your mortgage loan, First Tech requires an appraisal of the property you intend to finance. First Tech will work with a third party appraisal management company who will assign a licensed appraiser to complete the inspection and provide a valuation report. An appraiser is a licensed individual who is familiar with the local area of the home. Federal regulations state that the appraiser must be impartial and have no direct or indirect interest in the transaction.
A home’s appraised value is influenced by recent sales of similar properties and current market trends. The home's amenities, the number of bedrooms and bathrooms, and square footage are also key factors in assessing the home's value. The appraiser must do a complete evaluation of the interior and exterior, noting any conditions that adversely affect the home’s value such as needed repairs.
Appraisers are required to take photos of the interior and exterior of the home. They will also document details of comparable sales that are used in their valuation. The report must include a street map showing the appraised home and comparable sales locations, a building sketch, explanation of how the square footage was calculated, and any other information used in determining the fair market value of the home.
Mortgage Insurance—also referred to as Private Mortgage Insurance or PMI—offers protection for a lender in case a mortgage payment is missed. Borrowers are typically required to pay mortgage insurance if they are making a down payment of less than 20 percent of a home’s purchase price, however it is also required for some federal loans.