At the mortgage closing, you’ll pay a variety of fees, one of which may include the home appraisal. Some appraisers require payment upfront while others allow you to pay the home appraisal cost at the closing. Regardless of when you pay it, you want to know how much it will cost you. The actual cost depends on where you live and the appraisal used. The size of the home and the type of appraisal will also play a role.
The Average Home Appraisal Cost
The average home appraisal costs between $300 and $600. You might encounter a higher or lower price if the home is very small; you only need a drive-by appraisal or the home is very large. The lender and/or appraiser should let you know of the cost before you agree to the loan.
Before you choose a mortgage lender, it’s a good idea to ask about the cost of the appraisal as well as other third-party fees. Some lenders will allow you to bring in your own appraiser, if you found one that charges less. This is up to lender discretion though, as the lender needs to make sure the appraiser is licensed, insured, and experienced. The lender relies heavily on the appraisal because they report the value of the home, which is the lender’s collateral.
How the Appraisal Affects Your Loan Approval
It’s usually best to use the appraiser the lender has a business relationship with because chances are they are reputable. As stated above, the lender relies on the appraiser’s opinion of the home’s value. If the appraiser feels the home is worth less than the purchase price, he will let the lender know. This could ruin your chances for loan approval because the home needs to be at least worth the purchase price of the home.
While no one wants to lose their loan approval, you also don’t want to buy a home that is worth less than you pay. This would put you upside down on a home right from the start. This isn’t a good situation to put yourself in since the first couple of years of mortgage payments consist mostly of interest. The combination of paying more than the home is worth and paying little principal on the home leads to you staying upside for quite a while after buying the home.
The Type of Home Appraisals
Typically, lenders order a full appraisal, which means the appraiser evaluates the interior and exterior of the home. He will walk through all areas of the home, taking pictures of certain areas of both the interior and exterior. He will make sure all aspects of the home are in good condition and that everything is in good working condition.
Lenders may also order a drive-by appraisal in some cases. This is usually the case during a refinance only. The drive-by or exterior appraisal just evaluates the exterior of the property. The appraiser does get out of his vehicle and take exterior pictures of the home, but he does not need access to the interior of the home. Lenders use this option when they have good reason to believe the interior of the home is in good condition, which is reinforced based on the appraiser’s evaluation of the exterior of the home.
The drive-by appraisal is usually the least expensive appraisal, but it’s often the rarest option. You should count the home appraisal cost to be anywhere between $300 and $600, though. Asking your lender what to expect can help you determine just how much you need for this cost. Don’t forget to ask if you need to pay the fee upfront or if you can pay it at the closing as well.Click to See the Latest Mortgage Rates»