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Hi everyone, how are you? It's Leah Coss with the Mortgage Center. I wanted to talk about appraisals and home inspections because many of you ask, "Hey, sometimes it seems like I need an appraisal, sometimes I don't. Is that because of the lender? Is that because I am using a broker? What is up with this situation?"
Well the short answer for home inspections is a lender will never ask you for a home inspection. That is something for your own peace of mind, and I highly recommend that you do that if you are buying a home. You want to make sure that everything is in tip top shape or if it isn't, you want to know what kind of money you are going to be forking out for this house over the course of the time that you live there.
So the inspection is for you, never for a lender. A lender will not ever, as far as I've seen, request an inspection. So that can save you a couple of dollars if you feel really confident in what the home structure is like.
An appraisal however is much different. I always try to instill in people that you are not getting a loan based on goodwill. You're getting it based on the value of the collateral, i.e., the house. So with that in mind, the banks want to make sure that if you are buying a house for $400, 000, that it is worth $400, 000.
Because the whole five percent down, 10 percent down, that is a hard and fast rule. And it has to be five or 10 percent down of the market value, not of the purchase price, of the market value. OK?
So that's why an appraisal is so important to the bank. It's basically covering their butt on the collateral that they're offering this loan on. So when is it that you need it, when is it that you don't? Well if you are putting less than 20 percent down, you may or may not know, depending on if you listened to my other blogs, that if you put less than 20 percent down, your mortgage is automatically insured.
Now is it insured for you? No, it's insured to cover the bank's butt. And it is also called CMHC, Genworth and AIG Insurance. These are the mortgage insurers that we have to choose from, and all lenders must use them. If you put less than 20 percent down, then because it is insured, it is up to the insurer to dictate whether an appraisal is needed. And in a typical protocol is that they get the appraisal. They don't ask you for it. So therefore you don't have to worry about paying for it.
If you are putting over 20 percent though, now your mortgage most likely is not insured. Some lenders do what we call bulk insure and it's always insured. But for most of them, they're not bulk insurers. Therefore the bank is not [inaudible 02.
32] by hidden mortgage insurance. So they want to make sure that this appraised value and the market value is the same as the purchase price.
Now they are going to start asking for appraisals from you, which is going to cost you a few hundred dollars depending on how fast you need it done. It can go anywhere from $200, to $400, to even $600, also dependent on the size of the property that's being appraised. So what happens with these appraisals? Or actually, let me cover this first.
There are some lenders that are actually new school, I guess. They're not old school. And they're getting online. And there are very high tech, pretty reliable, online appraisal systems. Not all lenders use them, but some do.
And if you are looking at a property that is very common type property, nothing crazy or unique about it, and if it is in a very metro area or commonplace, a busy place, not small towns, not isolated in anyway. Then they will actually be able to use these online systems, and be perfectly satisfied with those appraised values.
So again, that's going to save you some cost. How do you know which lenders do that? Unfortunately, most of the lenders who do that are not your typical five chartered banks. Some do, however.
The only way to know who's who, is either to go around and call them all, or just save yourself some time, use a broker. So if you have any questions about inspections or appraisals, and I'll cover actual appraisals and what they are looking for, and what can be included in appraisal and what can't, I'll do that in another blog for you. So definitely pay attention and stay tuned for those.
But if you have any questions about an appraisal or an inspection. You feel like you've been pushed into something that you didn't think you should have had to pay for, please give me a call. I'll be happy to just give you my two cents on the issue, or to help process an application and hopefully save you some dollars on your appraisals for your purchase.
So Leah Coss with the Mortgage Center. Hopefully I've helped you out, and hopefully I'll be talking to you soon.
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New Immigrant Mortgage Productsby MortgagesInVancouver278 views
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