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Primacy Mortgage - Atlanta, Georgia - Mortgage 101 - Process - Processing
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Loan
Process
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| What
is an appraisal and who completes it? |
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To
determine the value of the property you are purchasing
or refinancing, an appraisal will be required. An
appraisal report is a written description and estimate
of the value of the property. National standards
govern not only the format for the appraisal; they
also specify the appraiser's qualifications and
credentials. In addition, most states now have licensing
requirements for appraisers evaluating properties
located within their states.
The appraiser will create a written report for us
and you'll be given a copy at your loan closing.
If you'd like to review it earlier, your Loan Officer
would be happy to provide it to you.
Usually the appraiser will inspect both the interior
and exterior of the home. However, in some cases,
only an exterior inspection will be necessary based
on your financial strength and the location of the
home. Exterior-only inspections usually save time
and money, but if you're purchasing a new home,
your Loan Officer will contact you to determine
if you'd be more comfortable with a full inspection.
After the appraiser inspects the property, they
will compare the qualities of your home with other
homes that have sold recently in the same neighborhood.
These homes are called "comparables" and play a
significant role in the appraisal process. Using
industry guidelines, the appraiser will try to weigh
the major components of these properties (i.e.,
design, square footage, number of rooms, lot size,
age, etc.) to the components of your home to come
up with an estimated value of your home. The appraiser
adjusts the price of each comparable sale (up or
down) depending on how it compares (better or worse)
with your property.
As an additional check on the value of the property,
the appraiser also estimates the replacement cost
for the property. Replacement cost is determined
by valuing an empty lot and estimating the cost
to build a house of similar size and construction.
Finally, the appraiser reduces this cost by an age
factor to compensate for depreciation and deterioration.
If your home is for investment purposes, or is a
multi-unit home, the appraiser will also consider
the rental income that will be generated by the
property to help determine the value.
Using these three different methods, an appraiser
will frequently come up with slightly different
values for the property. The appraiser uses judgment
and experience to reconcile these differences and
then assigns a final appraised value. The comparable
sales approach is the most important valuation method
in the appraisal because a property is worth only
what a buyer is willing to pay and a seller is willing
to accept.
It is not uncommon for the appraised value of a
property to be exactly the same as the amount stated
on your sales contract. This is not a coincidence,
nor does it question the competence of the appraiser.
Your purchase contract is the most valid sales transaction
there is. It represents what a buyer is willing
to offer for the property and what the seller is
willing to accept. Only when the comparable sales
differ greatly from your sales contract will the
appraised value be very different. |
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| What
types of things will an underwriter look for when
they review the appraisal? |
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In
addition to verifying that your home's value supports
your loan request, we'll also verify that your home
is as marketable as others in the area. We'll want
to be confident that if you decide to sell your
home, it will be as easy to market as other homes
in the area.
We certainly don't expect that you'll default under
the terms of your loan and that a forced sale will
be necessary, but as the lender, we'll need to make
sure that if a sale is necessary, it won't be difficult
to find another buyer.
We'll review the features of your home and compare
them to the features of other homes in the neighborhood.
For example, if your home is on a 20-acre lot, or
has a large accessory building, we'll want to make
sure that there are other homes in the area on similar
size lots or with similar outbuildings. It is hard
to place a value on such unique features if we can't
see what other buyers are willing to pay for them.
In some areas, additional acreage or outbuildings
could actually be a detriment to a future sale.
Finding comparable properties can be more challenging
in rural areas where it is more difficult to find
homes that have similar features.
We'll also make sure that the value of your home
is in the same range as other homes in the area.
If the value of your home is substantially more
than other homes in the neighborhood, it could affect
the market acceptance of the home if you decide
to sell.
We'll also review the market statistics about your
neighborhood. We'll look at the time on the market
for homes that have sold recently and verify that
values are steady or increasing. |
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| Will
I get a copy of the appraisal? |
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| As
soon as we receive your appraisal, we'll update
your Loan Status with the estimated value of the
home. As a standard practice we will provide a copy
of your appraisal at closing. |
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| Are
there any special requirements for condominiums?
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Since
the value and marketability of condominium properties
is dependent on items that don't apply to single-family
homes, there are some additional steps that must
be taken to determine if condominiums meet our guidelines.
One of the most important factors is determining
if the project that the condominium is in is complete.
In many cases, it will be necessary for the project,
or at least the phase that your unit is located
in, to be complete before we can provide financing.
The main reason for this is, until the project is
complete, we can't be certain that the remaining
units will be of the same quality as the existing
units. This could affect the marketability of your
home.
In addition, we'll consider the ratio of non-owner
occupied units to owner-occupied units. This could
also affect future marketability since many people
would prefer to live in a project that is occupied
by owners rather than renters.
We'll also carefully review the appraisal to insure
that it includes comparable sales of properties
within the project, as well as some from outside
the project. Our experience has found that using
comparable sales from both the same project as well
as other projects gives us a better idea of the
condominium project's marketability.
Depending on the percentage of the property's value
you'd like to finance, other items may also need
to be reviewed. |
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| I'm
purchasing a home, do I need a home inspection AND
an appraisal? |
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Both
a home inspection and an appraisal are designed
to protect you against potential issues with your
new home. Although they have totally different purposes,
it makes the most sense to rely on each to help
confirm that you've found the perfect home.
The appraiser will make note of obvious construction
problems such as termite damage, dry rot or leaking
roofs or basements. Other obvious interior or exterior
damage that could affect the salability of the property
will also be reported.
However, appraisers are not construction experts
and won't find or report items that are not obvious.
They won't turn on every light switch, run every
faucet or inspect the attic or mechanicals. That's
where the home inspector comes in. They generally
perform a detailed inspection and can educate you
about possible concerns or defects with the home.
Accompany the inspector during the home inspection.
This is your opportunity to gain knowledge of major
systems, appliances and fixtures, learn maintenance
schedules and tips, and to ask questions about the
condition of the home.
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| I've
heard that some lenders require flood insurance
on properties. Will you? |
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| Federal
Law requires all lenders to investigate whether
or not each home they finance is in a special flood
hazard area as defined by FEMA, the Federal Emergency
Management Agency. The law can't stop floods. Floods
happen anytime, anywhere. But the Flood Disaster
Protection Act of 1973 and the National Flood Insurance
Reform Act of 1994 help to ensure that you will
be protected from financial losses caused by flooding.
We use a third
party company who specializes in the reviewing
of flood maps prepared by FEMA to determine if
your home is located in a flood area. If it is,
then flood insurance coverage will be required,
since standard homeowner's insurance doesn't protect
you against damages from flooding.
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| How
long does it take for the property appraisal to
be completed? |
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| Licensed
appraisers who are familiar with home values in
your area perform appraisals. We order the appraisal
as soon as the Application Fee is paid. Generally,
it takes 10-14 days before the written report is
sent to us. We follow up with the appraiser to insure
that it is completed as soon as possible. If you
are refinancing, and an interior inspection of the
home is necessary, the appraiser should contact
you to schedule a viewing appointment. If you don't
hear from the appraiser within seven days of the
order date, please inform your Loan Officer. If
you are purchasing a new home, the appraiser will
contact the real estate agent, if you are using
one, or the seller to schedule an appointment to
view the home. |
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