A Sonoma County Refinance Loan will require an appraisal in order to determine the value of the property the mortgage lender will lend against. Unlike the purchase transaction, the refinance deals solely you as the borrower, the mortgage lender and the real estate appraiser who has been hired to do a valuation of your property.
Here’s how to deal with a low appraisal on a Sonoma County Refinance Loan.
Let’s say you believe your value of your home is $300,000. You only owe $200,000 on your property and you are trying to reduce your monthly payment with today’s low mortgage rates. After the appraisal is ordered, the valuation comes in at 220,000 changing your loan to value to 90% from 66%.
Obviously, you’d be upset if your appraisal came in lower because that signifies less equity in your property.
What to do?
- Assess the situation-look at the comparables of the properties used in your appraisal. How close are the properties? Are they within a 1 mile radius of your home? Did these comps take into consideration the square footage and the bedrooms and adjust for differences? All of these things can affect the value.
- Have any properties sold on the market since your appraisal has been completed? Believe it or not this actually happens more often than not, because properties are being bought and sold everyday. If other properties have sold which are considered to be comps for your home, talk to your mortgage lender and ask them to send those into the appraisal company for reconsideration of value.
What happens if the needed appraised value comes in however, the underwriter feels the comps don’t work?
This happens very frequently. Lenders trying to make sure they are doing integrity mortgage lending. They have a fiduciary responsibility to their investors and are only trying to make sure risk is minimized. It’s a byproduct of the current lending environment Be prepared for it.
How was your mortgage loan originally structured?
Was your loan structured as a conventional loan when it should’ve been an FHA loan? Maybe your loan could’ve been structured as part of the HARP program (making homes affordable).
For example if your loan is owned by Fannie Mae or Freddie Mac you may not even need an appraisal, omitting the loan to value restriction anyway. An internal valuation would be given by the computer system that mortgage lenders use provided by Fannie Mae and Freddie Mac.
What is your time frame like for living in the property or holding the property?
If you plan to keep the property for the foreseeable future, it might make sense to simply pay the difference in mortgage debt in order to get an interest rate with today’s rates. Presently 30 year fixed-rate money is near 4% for little or no points. If you have the ability to pay down your principal balance, and you know you’re going to keep the property for a very long time and mathematically the interest savings and/or cash flow make sense, then consider paying down your balance to complete your Sonoma County refinance loan.
Dealing with the low appraisal on a Sonoma County refinance loan can be manageable.
If your home appraisal comes in lower on your refinance loan, you have options. Conduct the research, have a conversation with your mortgage lender and determine what makes the most sense to you financially. Low appraisals don’t always happen, but they do happen from time to time.
Get a complementary mortgage rate quote our refinance loan today. Learn about to deal with a low appraisal on a Sonoma County refinance loan.