If you want to refinance your mortgage, you’ll likely need an appraisal. If you want to cash out some of your home’s equity or even if you just want a rate/term refinance, the lender needs to know how much your home is worth.
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The higher the value the appraiser gives your home, the more money you can take out of your home’s equity. Even if you don’t need cash out of the equity, a higher value gives you a lower LTV, which sometimes means a lower interest rate on your loan.
In order to maximize your home’s value, you should prepare your home for the appraisal using the following tips.
Clean up the Exterior
Curb appeal means a lot to appraisers. It’s the first impression they have of your home, so why not make it a good one? If you have a cluttered exterior of your home, the appraiser will expect to see a cluttered interior as well. The last thing you want is him entering your home with negative connotations in mind. Take the time to clean up your yard, trim your bushes, and make the exterior look neat.
Clean up the Interior
Just as the exterior should be clutter-free, the interior should too. Even though it probably shouldn’t affect the value of your home, it probably will. The more clutter you have in your home, the less the appraiser can see of your home. If he can’t have a clear view of your home’s features and conditions, he will likely appraise it for less than the home may be worth. Take the time to clean up each room to make them clutter-free.
Maintain Your Home
You can expect the appraiser to try faucets, light switches, and fans work. They may seem like small details, but if something like a faucet isn’t working, it may prompt the lender to look even further into what may not be working in the home. It’s your responsibility to maintain the home. If you don’t, it can knock thousands of dollars off your home’s value.
Make Small Upgrades
If you can afford it, making small upgrades can have a large impact on your home’s value. Even the small task of replacing a light fixture or updating a sink can have a great impact on your home’s value. Focus on areas where you spend a lot of time, like the kitchen, bathroom, and bedrooms as those rooms have the largest effect on a home’s value.
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Show Records of Your Upgrades
If you did major upgrades in the past, make sure you show them to the appraiser. This doesn’t mean just show the improvement, but show the proof of the cost of the improvement. You’ll want to show the appraiser the dates you made the improvements and what was done. This way the appraiser can effectively include it in the value of the home.
Loans That Don’t Need an Appraisal
While most refinance loans require an appraisal, there are two loans that don’t’ require you to get an appraisal. The FHA streamline loan and the VA streamline loan both don’t require an appraisal.
These loans are strictly for rate/term refinance purposes. You can’t touch the home’s equity with these loans. But if you want to lower your interest rate or change your loan’s term, you can do so with these programs and without the need for an appraisal. This can be nice for homeowners that know their home value decreased in the recent past as that could negatively affect the refinance under normal circumstances.
Keep in mind though that you’ll need an appraisal for a rate/term conforming refinance. The two government-backed programs are the only two loans that don’t require an appraisal. Most other loan programs require the appraisal so that the lender can make sure your home is worth enough for them to lend you money.
The refinance appraisal may seem like a pain, but it’s a way for the lender to make sure you have enough collateral for them to lend you money. As long as you take the time to get your home ready and keep up with its maintenance, you will be in good shape to get a good appraisal for your home.
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