Appraisal
A lender-ordered valuation that estimates what the home is worth in the current market.
Definition
An appraisal is an independent opinion of a home's market value used by the lender to confirm the property supports the loan amount.
Category: Home Value
Why appraisal matters
The lender is lending against the property, not just against your income. If the home appraises below the purchase price, the lender may reduce the approved loan amount and require you to bring in more cash or renegotiate with the seller.
What happens if the appraisal comes in low
You usually have four options: challenge the appraisal with better comparable sales, ask the seller to lower the price, increase your down payment to cover the gap, or walk away if your contract allows it.
One thing buyers often miss
An appraisal is not the same as a home inspection. The appraisal is mainly about value and basic marketability. The inspection is the detailed review of the home’s condition.
Related glossary terms
- Loan Estimate - The early disclosure that outlines a mortgage offer's rate, payment, and fees.
- Cash to Close - The final dollar amount you need to wire or bring to closing.
Related loan programs
- Conventional Loans - Conventional loans aren't backed by a government agency, follow Fannie Mae and Freddie Mac guidelines, and reward strong credit with the lowest rates and most flexible terms available.
- FHA Loans - FHA loans are insured by the Federal Housing Administration and let you buy with as little as 3.5% down and a 580 credit score, making them a top choice for first-time buyers and credit rebuilders.
- VA Loans - VA loans are guaranteed by the Department of Veterans Affairs and let eligible veterans, active-duty service members, and surviving spouses buy with zero down payment and no monthly mortgage insurance.