Yesterday we talked about your Credit History as leg one of and how it fits into the CHAIR. Today we’ll discuss the “A”.
ASSET – The second leg refers to the property you intend to buy. This “leg” is critical to a lender’s decision because the house is the lender’s security for the loan and if you cannot make your payments it’s what the lender now becomes the homeowner.
Your lender wants to make sure your home is comparable in value to the other sales in the neighborhood and to make sure the sales price accurately reflects the value. HINT: Your Realtor represents the seller (unless you sign a buyer’s agreement) so you want to do your own homework on what the “comps” are in the area. There are a number of websites including www.zillow.com. You can also ask your Realtor to provide you a list of the comps from MLS to help you determine a good offer price.
When the time is right, your lender will order an APPRAISAL. The appraisal will cost between $350-$425 and is done by a licensed and certified appraiser of the lender’s choosing. His/Her job is to determine the correct market value and to make sure your new home meets the minimum health and safety standards.
Sometimes your offering price will be more than the appraised value. If that should happen, then one of two things will need to happen 1) Renegotiate with the seller a lower price or 2) You can bring in a bigger down payment. Loans are always based on the LESSER of sales price or appraised value.
The appraisal is protection for you and the lender to make sure your purchase price accurately reflects market conditions. Paying too much for a house doesn’t help anyone except the seller.
Tags: first time home buyer credit, first time home buyer loans, help for first time homebuyers