If you are looking to take advantage of low interest rates and refinance your home, you will likely need an appraisal. While there are some loan programs, such as an FHA Streamline Refinance, that don’t require an appraisal, most of them do. Getting the most value for your home is extremely important when refinancing. Mortgage lenders determine the mortgage interest rate on several factors including loan to value, which is established by the value of your home and what your total mortgage balance will be. The higher your loan to value – the higher your interest rate.
Tips to Getting the Most from Home Appraisals
• Clean your home – It is important to thoroughly clean your home prior to an appraisal. This includes removing clutter and debris from the yard. The appraiser will take photos of your home and prepare an opinion on the condition of the home. If your home is dirty and cluttered you will likely receive a lower value as it will appear that the home is run down.
• Remodeling – If you want to increase your homes value consider updating the bathrooms and kitchen. Small improvements like replacing a bathroom vanity, or the kitchen appliances, can directly impact the value of your home. These two rooms deliver the highest return for your remodeling dollars.
• Replace the windows – New windows will also increase the value of your home. Speak with your city and various window companies to find out if there are tax or financial incentives for replacing windows in your area.
• Landscaping – The amount of direct value you receive from landscaping is debatable but it is clear that you will have a more favorable value by have a yard that is well kept and manicured.
• Remove signs of a home business – It is important to remove any signage or obvious signs of a home based business. This can raise concerns regarding appropriate insurance coverage and licenses. Your mortgage lender will use self employment income in determining whether or not you financially qualify for the loan but this does not need to be factored in the homes value.
• Vehicles – If you enjoy collecting cars, have multiple teenage drivers, or like to repair vehicles at home – remove them from the premises prior to the appraiser visiting. While this may be strictly a hobby, many lenders have rules regarding how many vehicles you can have on your property before requiring an environmental study to be conducted.
The value of your home is primarily determined by the area you live in. An appraiser will evaluate what other homes have sold for within a zero to three mile radius of your home within the past 90 days. These homes are called comparable and the appraiser will adjust your homes value up or down based on compensating factors such as the number of bedrooms, bathrooms, age of the home, and improvements that have been done.
Ask your mortgage lender what your home is likely to appraise for. While they cannot give you a true value, they can show you how to learn what other area homes have sold for. If it is likely that your home is underwater (you owe more than it is worth) consider using the HARP refinance program. It has especially been designed for people that owe more than 80% loan to value and can help you reduce your mortgage interest rate regardless of owing more than your home is worth.
