Playing and Surviving the Interest Rate and Appraisal Game

5 Ways to Get A Lower Interest Rate and The Appraisal Game

Interest rates right now are at an all-time historic low- below 4%, even for a jumbo loan.  So many folks out there are wondering how to go about taking advantage of this situation.

1. Research your home’s value. Looking at your home’s tax value, checking online estimates, or asking a real estate agent for a price opinion can help you determine how much your home might be worth. The only way to know for sure if a refinance is in the cards is to order up a $400 appraisal.  Call me for referrals for your specific area. 831-236-4513
2. Check your FICO credit score. It’s the most widely used score in the mortgage industry. If you are concerned about your credit, buy your FICO score from one of two credit bureaus for $19.95 ($39.95 for both) at www.myfico.com.   You can also estimate your score at the site, or at www.creditkarma.com .
3. Call your current mortgage holder to see if they can offer a better deal without an appraisal and major paperwork. Compare any offer with at least one bank and credit union before ordering an appraisal. It may also pay to work with a mortgage banker who has access to multiple lenders.  Of course I have great referrals for those as well.  Email me at pattyross@kw.com.  
4. Consider the term. Many families are switching from 30-year mortgages to shorter terms. Some are even throwing cash into the mortgage at the closing table. But, since only 24 % of Americans have at least six months of emergency savings, paying the mortgage faster may not be the best choice for many. I really like the idea of starting a housing fund in a savings account that could be used for a down payment when it’s time to move, a remodel, or just a cash cushion.
5. Create a plan for the money freed up by a lower monthly payment. Will you take the savings and throw that money back into the mortgage to reduce principal faster? Will you start saving for college or retirement or finally pay off that credit card debt? Come up with a plan. Otherwise, you risk whittling that money away with nothing to show for it.

5 Ways to Fight a Low Appraisal:

What do you do when the appraisal on the dream home you want to buy comes in below the price in the offer the seller has accepted—even as much as 10 to 20 %  below?
Chances are that raising the cash for your down payment and closing cost has tapped you out. Finding thousands more to make up the difference between the appraised value and the contracted amount is out of the question. However, you don’t have to walk away.  You can fight back. You have options, and chances are you can find a way to make the deal work without increasing your down payment.

1. Get the seller to lower the price. By far, this is the easiest solution, especially if your appraisal comes in less than 10 % of the contract price. So why would a seller go along? In July, 2011 the average home in America took about 88 days to sell, about right for the under $1M market here, 133 days for the over $1M market.  Demand is soft and time is money. Lowering the price might be a cheaper option for the seller in order to get the deal done on time. Sometimes a bird in the hand is best.
2. Ask the seller to offer to carry a second mortgage for the difference. This solution doesn’t cost the seller anything but the buyer incurs greater debt. If the buyer really wants the home but can’t come up with the difference in cash, making payments or a lump sum payment at a later date to the seller is an option.
3. Do your research and dispute the appraisal.  You have the right to get a copy of the appraisal from your lender and to find out who did it. If your appraisal was conducted by an out-of-town appraiser unfamiliar with your market, you have every right to demand a new appraisal.
4. Ask the lender for a new appraisal. Should you find that you have a good case that the appraisal wasn’t fair or accurate, ask your lender for a new appraisal. Depending on how convincing your argument is, your lender has the ability to override the appraisal estimate, which is unlikely, or to order a new appraisal, which is more likely.
5. Get your own, independent appraisal. If you order your own appraisal and your loan is an FHA loan, ask the lender for a list of approved appraisers. Usually the bank will review your appraisal and ask the previous appraiser if they agree or disagree with the newly submitted one.

If the first appraiser disputes your appraisal, the bank may request a third appraisal, or they may just reject your appraisal.  However, if the first appraiser agrees with the disputes you present, they may adjust their original appraisal and you may get a better price.

If these tactics fail and you can’t make up the shortfall in the appraised value, you may find yourself moving on. If so, be sure that you were protected by a contingency clause in the sales contract, stating that the transaction can be terminated if the home doesn’t appraise at, or above, the sales price.  And of course any good agent knows that.

© Patty Ross, KRXA Radio Show # 217