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I’m a very first-time home buyer. I know you want the property to appraise for the asking price or much more. Is there ever such thing as too high of an appraisal when finding a mortgage? I’m carrying out a guaranteed USDA loan. I had to use one of their approved appraisers. My mortgage officer told me it was uncommon that a house is valued much a lot more than the obtain cost since the USDA likes the price to come in quite close to the acquire cost.
The appraisal was 25% more than asking . . . Is the USDA going to take issue with this? I mean for my personal worth this is a fantastic factor, but I’m worried they aren’t going to like the appraisal.
Also, would this be regarded instant equity? Ideally I’d like to take out an equity loan that is about 5% of the appraised value of the residence to pay off unsecured credit. My mortgage broker said no way, but that was just before the high appraisal.
Ooops I meant 25% more than selling cost.
Answer by kateg
T he general rule on all mortgages goes this way. The loan will be based on the price agreed upon in the purchase agreement or the appraisal value “WHICH EVER IS Much less”. In a way the difference does go to the buyer in terms of equity.
The best example that I can give is: Lets say you put in an provide to purchase a property at $ 100,000 and this offer you is accepted. Then the appraiser values the property at $ 120,000. Your loan quantity will nonetheless be based on the agreed buy price of $ 100,000. Now, in a way the added money does come to you in the terms of equity, due to the fact if you wanted to go and get a home equity line of credit you could. So in closing, the funds does not come to you in the form of a check. But you created a wonderful buy and are walking into a house with equity.
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“The appraisal was 25% over asking” – This is awesome for you. It means that you INSTANTLY make an extra 25% equity, since you still only pay for the agreed price.
The USDA would only have an issue with a LOW appraisal.
The only possible problem is the underwriter could carefully review the appraisers work and see if they made some mistakes. This should not be a problem for you. I would not get real excited. You probably did make a good purchase, but the appraiser may have also made a few mistakes and the “real” value may be more similar to what you paid.
I see no way this is a problem for you.
The bank will not make you a higher loan based on the appraisal.