How Does a Home Appraisal Work?

During most real estate transactions, it will be necessary to have a home appraisal completed. This formal process of evaluation is the most effective, un-biased way to determine the current value of a home for everyone involved in the transaction. While the concept might not seem confusing, there are several misconceptions that can make the process seem complicated. Understanding what the appraiser does and how their evaluation plays a role in your financing can make the transaction easier.

Home values fluctuate because of a variety of factors including supply, demand and regional influences. A home appraisal determines the current market value of a property on the date the inspection is completed. Since this value will be used by the lender to determine the loan amount, an approved, reputable appraiser must be hired to complete the evaluation. It is important to note that the formal appraisal report is filed with a national bureau when financing is being used from FHA, FNMA and Freddie Mac. The report and the property value is registered with the national database and kept on file for six months. This keeps buyers and sellers from “shopping around” for a different value.

Canceling Private Mortgage Insurance

Private Mortgage Insurance is a special type of insurance policy, provided to protect the lender against loss if a borrower defaults on their loan. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price.

The Homeowners Protection Act provides two methods for you to remove PMI (Private Mortgage Insurance) from your home loan: requesting cancellation or automatic cancellation. Keep in mind that these rules apply to conventional mortgage loans and are only applicable to loans that closed after July 29, 1999.

Requesting PMI Cancellation

You can request that your lender cancel PMI when the principal balance of your mortgage falls, or is scheduled to fall to 80 % of the original value of your home.

Here are some additional requirements that must be met in order to cancel PMI:

• Your request must be in writing.
• You must have a good payment history and be current
• on your payments.
• Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.
• Your lender can also require you to provide evidence, usually with an appraisal, that the value of your property hasn't declined below the value of the home when you first bought it. If the value of your home has decreased, you may not be able to cancel PMI.

What is Happening to Mortgage Rates?

Mortgage Rates continued their move higher, as financial markets adjust to the price of the “new perceived” realities of the presidential election. The average 30yr fixed rate has surged .5% higher.  The last time rates moved in this manner was in mid-2013.

What is the concern about the new perceived realities? Markets are repricing based on a Trump presidency and GOP-controlled congress. The problem is that markets have to “guess” as to the future outcome of the policies that Trump might enact as well, as the extent to which the legislative and executive branches will work collaboratively with his policies. Unfortunately, most of the best guesses are not good for US bonds. Higher spending, lower taxes, protectionist trade policies, and deregulation policies all add up to inflation. Inflation is the enemy of low interest rates.

Fortunately, this repricing of rates is likely to be short-lived. Unfortunately, that doesn't mean rates will simply come surging back to previous levels although we have clearly seen this happen in the past. We are looking at an actual feeling of increased risk (as opposed to just a reaction to the election). It would take a new motivation for the repricing to occur in a more positive direction. Until then, a lowering in rates isn't out of the question. Indeed, that can happen as a corrective move but there's no guarantee of its size or that rates may continue to move higher before it happens.

Working with a mortgage professional that offers many options will help you to acquire the best rate for your needs. Keep in mind that the rates today are still great. Do not let this increase stop you from the purchase of a home.

About the Author..

Toni F. Ryan | NMLS#230507

Senior Loan Officer | Synergy One Lending

Toni F. Ryan has over 20 years experience in mortgage lending - both on the wholesale and retail levels. She believes that education is key to making the best decision for YOU! She shares her insight into the lending world here and encourages your feedback. Don't forget to connect on Facebook!

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Understanding Advertised Mortgage Rates in California

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Ads for home loan offerings are everywhere. Online, on TV, driving down the street, or listening to the radio, mortgage loans are probably the most common advertisement.

Lowest Rates Offered...are Lures

Banks and mortgage companies promise that they will do whatever they can to offer homeowners the lowest mortgage payment. It is important to understand the rate market and that it is constantly changing   daily and often hourly.  When you see an ad from a bank or mortgage lender that offers a lower rate, or gives you one solid payment figure based on a certain loan amount, you should be skeptical. In fact, most banks and lenders usually offer rates to just bring you in the door, though you may never actually be offered the advertised rate.

10 Credit Do's & Don'ts to Remember Prior to Getting a Mortgage Loan

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How can a fully approved loan get denied for funding after the borrower has signed loan docs? Simple, the underwriter pulls an updated credit report to verify that there hasn't been any new activity since original approval was issued, and the new findings kill the loan.

This generally won't happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days. Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.

Why this happens?

It's can be an ugly cycle where by the buyer receives an approval and thinks everything is OK so they make a credit impacting decision (buys new car, furniture, runs up credit card balance).

The lender's Funder pulls new credit report right before they fund the loan to check for changes. The Funder sees the new credit or larger balances and denies the loan.

5 Myths About Home Values in California

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During periods of economic growth, home values typically go up and most homeowners do not question appraisals. Conversely, in times of turmoil when property values are declining, homesellers naturally question appraisal values.

The actual appraisal process has changed very little over the course of the housing boom and bust cycle but since the topic of home values seems to be a hot discussion, let's address the top five appraisal myths/questions.
Appraisal Myths:

Myth #1- Appraisal values are based upon a simple formula that uses dollar per square foot and comparable sales prices.

Reality - There are several factors the affect the value of a property which include comparable sales prices, location, amenities, exterior and interior condition, maintenance, lot size, bed and bath count, traffic and much more.  There is no simple formula.

Loan Options Available for Home Buyers in California

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There are many home loan types to consider when seeking financing to purchase a home.  The loan you choose will have a long term effect on your financial picture so it is important that you understand your options before you commit.

• Fixed Rate Mortgages 

Fixed rate mortgages are probably the most popular loan due to the fact that the payment stays the same throughout the life of the loan. Each monthly payment is comprised of a portion to pay the principle of the loan and the interest on that loan.  Many times the monthly payment can include the payment for the taxes and insurance due on the home.  The payments continue for a pre-determined time after which the home is paid off.  The most common terms are 30 year and 15 year.

Buying After a Short Sale in California

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Good News! Changes in lenders' guidelines have reduced the waiting period for buyers who wish to purchase a home after experiencing a short sale. Maintaining good credit since, paying all bills on time in the last 12 months, saving a down payment (as little as 3.50% to 20% down payment), and of course, having income to qualify for a loan make it possible to buy a house in as little as 12  to 36 months.