Steps to Take if Your Appraisal Comes in Low
April 15, 2025
Is this a deal-breaker? Believe it or not, it isn't the end of the road. A low appraisal can sometimes be just a bump in the road. In other cases, you may wish to walk away from the deal. Here's your game plan to navigate this situation:
Step 1: Understand Why
Do you know why the FHA requires an appraisal in the first place? They're backing your loan, often because you have a smaller down payment or less-than-perfect credit. The appraisal ensures the property is worth the loan amount and has a remaining economic life for the duration of the mortgage.
Step 2: Details, Details
Ask your lender for a copy of the appraisal report. Understand the appraiser's reasoning and the comparable sales they used. This info is key for your next steps.
Step 3: Talk to the Seller
This is often your best first move. Show the seller the appraisal report and explain that the FHA loan will only cover the appraised value. Ask them to lower the price.
Any other VA or FHA buyer will likely face the same issue. They might agree to keep the deal alive, especially if they need to move. Be open to meeting in the middle, but know your limit.
Step 4: Consider Paying the Difference
Do you love the house? Can you afford to pay the difference in cash? But think this through. Can you afford it without hurting your finances? Is the home worth more than the appraised value in the local market?
Step 5: Challenge the First Appraisal
Work with your agent to find recent sales of similar homes that sold for more than the appraised value. Give this data to your lender. They might ask the original appraiser to reconsider. Appraisals are typically done a second time only due to deficiencies in the original. You can't contest an appraisal just because you don't like the dollar amount.
Step 6: Know When to Walk Away
If the seller won't budge, you can't pay the extra, and the appraisal challenges don't work, it might be time to walk. FHA loans allow this without penalty.
Step 8: Other Options?
Chat with your lender about other loan types. Maybe there's something with different appraisal rules. But if the house is truly overpriced for the local market, this might not solve the core issue.
Your Bottom Line:
A low FHA appraisal isn't the end of the world. Stay calm, get informed, and work with your agent and lender. Your best bet is usually to try and negotiate with the seller. Know your finances and your contract, and don't be afraid to walk away if it's not the right deal for you in the local market.
FHA Loan Articles
January 28, 2025Are you dreaming of transforming a diamond-in-the-rough house into your ideal home? Fixer-uppers offer a unique opportunity to personalize your living space and potentially build equity at a price lower than some occupant-ready homes.
January 27, 2025When buying or selling a home, two critical processes are often confused: the appraisal and the inspection. Though both involve a thorough examination of the property, they serve distinct purposes and provide different types of information vital to a successful FHA loan transaction.
January 22, 2025Consider this scenario: you've been in your home for five years or more and you've likely built up a significant amount of equity, and now you might be wondering how to put that equity to work for you. Whether you're dreaming of a major renovation, need to consolidate debt, or want to help a child with college tuition, you have options. Two choices are an FHA cash-out refinance and a home equity line of credit (HELOC).
January 20, 2025The FHA Streamline Refinance offers a refinance option for those who don't want to cash in on their property's equity but instead want a lower payment or interest rate or who need to get out of an adjustable-rate mortgage. This streamlined program, designed specifically for those already in an FHA-insured mortgage, simplifies the refinancing process with fewer requirements and faster approval times depending on the transaction.
January 16, 2025Want to buy a home and thinking about getting an FHA loan? FHA loans are a great way to make homeownership happen, especially if you're a first-time buyer or don't have perfect credit. But you might wonder, "Can I get more than one FHA loan?"
The short answer is, it's tricky. The FHA itself doesn't say no automatically to having more than one loan. But there's a caveat. FHA loans are about helping you buy a place to live in – your main home base. Because of this, and a few other things, getting multiple FHA loans isn't easy.
