The appraisal process of buying a home has some new rules – ones that are costing borrowers and lenders both time and money. The new rules were developed to protect from faulty appraisals but place regulations on how lenders can choose an appraiser when certain home loans are originated. While consumers in general may feel no concern about this rules in the past, they may suffer the consequences when their loan is delayed or canceled altogether because of appraisal issues.

The new rules became effective May 1, 2009 and were meant to reduce the occurrence of fraudulent appraisals where the home valuations were inflated. Lenders are now required to follow the Home Valuation Code of Conduct (HVCC) with regard to conventional or conforming loans being sold to Fannie Mae or Freddie Make. FHA loans are not affected by these guidelines because they are insured by the Federal Housing Administration, and neither are VA loans, which are guaranteed by the US Department of Veteran Affairs.

Helps and Hinders Borrowers
For home buyers, the new rules will help prevent them from paying inflated prices but those who are going through the refinance process and were hoping for a higher home value, the chances are greatly reduced. Typically, there are two types of appraisers that evaluate the true price of a home. One such group is considered to be the quick-service kind that produces appraisals based on minimal research. The other are the more reliable ones that do a lot of legwork to ensure the home is values accurately and fairly. Borrowers who once thought the appraisal process wasn’t much of a big deal, really do need to pay attention to the appraisal process because oftentimes a lazy appraiser can go too low and have a serious negative impact on a loan’s approval or sale price, as well as netting a higher interest rate. Borrowers should also be concerned about an appraisers ability to conduct the appraisal in a timely manner. In order for borrowers to lock in a decent interest rate and satisfy contract terms, an appraisal needs to be conducted and completed within a specified time frame. If an appraiser fails to come through, it can cause the loan approval to be declined.

Higher Costs
Another concern borrowers should note about the new appraisal rules is that the cost of an appraisal may be more expensive now due to additional regulations. Appraisals are more labor intensive and therefore, more costly. Borrowers may also be required to pay appraisal costs upfront, adding to their out-of-pocket expenses regardless of whether or not the loans comes to fruition. Plus, if the first loan attempt fails, borrowers may find they have to foot the bill for a second appraisal for a new loan application.

What To Do
If you are in the market for a home loan, experts advice that you speak with the lender at length before applying for a mortgage loan to find out whether a appraisal will be in line with the proposed loan. Borrowers can also do their own research by comparing sale price and home valuations and other trends in their area before applying for a loan to have a better idea of what to expect. Otherwise, a borrower may face significant disappointment and frustration at being turned down for a loan. It helps to have a good mortgage lender work with you through all the steps of the home loan approval process.

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Tags: home appraisals, home buying, lenders, mortgages

This entry was posted on Tuesday, July 14th, 2009 at 5:27 am and is filed under tips. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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