The Appraisal, Underwriting, and Final Loan Approval
Step 8 Completing the Loan
After the home passes inspection, your lender will arrange for an appraiser to provide an independent estimate of the property's value from a neutral, third-party appraiser. An appraisal protects you and the Lender from paying too much for the home. If the property appraises for value or higher, the appraiser will let all parties involved know that you are paying a fair price for the home and the transaction will continue toward closing.
If the appraisal comes in too low, your choices are to:
- Bring additional money to the table to make up the difference in price
- Negotiate with the Seller to lower the home price
- Contest the appraisal if you think there's an error in the report
- Walk away from the deal
If the home appraises the lender will submit the loan package to the underwriting department.
Underwriting goes over every aspect of the loan package with a fine tooth comb and gives the loan final approval or denial. If denied, you may get your earnest money back ...unless you waived the appraisal, or the Seller can prove the loan was denied due to you providing inaccurate or un-timely information. If approved, we move towards closing!
You can expect an appraisal to cost between $350 and $600, although this varies based on the type, size and location of the property.
Remember, you must avoid any major financial changes from the time you start the loan process until the home closes in order to avoid problems while in underwriting.
- Don't apply for new credit lines, loans or leases
- Don’t change your job or income
- Don't make purchases that will deplete your asset
- Don't deposit cash into your bank accounts before speaking to your lender
- Don't Co-Sign other loans for anyone
- Don't change bank accounts
- Don't close any credit accounts
Taking on new debt changes your debt-to-income ratio (DTI), a key factor in determining the loan amount. If your DTI increases, you may qualify for less money, which could be a problem depending on your savings and the home price. If you push your DTI past 45%, it's possible you won't qualify for a mortgage at all.