Are there any lenders that use the appraised value of a home for an equity loan the first year?

svroeder · Joined: 12 Jan 2009 Posts: 2 1.67 Dollars($)

Are there any lenders that use the appraised value of a home for an equity loan the first year?...For the first year, Bank of America uses the lower of either the appraised value or the sales price to determine qualification for a home equity loan. Do any lenders use an appraised value if it is higher? We completed extensive remodeling, so our home is worth much more than we paid.

adonis · Posted: Fri May 29, 2009 12:37 am Post subject:

Hi svroeder,

Usually, the practice is to consider the lower of either the appraised value or the sales price to determine qualification for a home equity loan. However, there are lenders who can scam people and go for inflated appraisal. This leads to severe credit and mortgage problems for the borrowers when the value of the property declines. Thus, those borrowers have to go for foreclosure or short sale. In case, the property is sold at a lower amount, then the borrowers have to pay the deficient amount from their pockets.

Guest

In our case, we have completed a significant remodel since the purchase, thus making the appraised value larger than the purchase price (not simply inflating it). Does this affect things?

jameshogg · Posted: Sun May 31, 2009 11:10 pm Post subject:

Hi Stacey,

Increase in property value due to remodeling of the property will not be considered as an inflated appraisal. So it would not affect you when you try to get a refinance. However, the lower of either the appraised value or the sales price will be considered while you go for a home equity loan.

Thanks

brian3 · Joined: 09 Jun 2009 Posts: 80 21.31 Dollars($)

All lenders I have dealt with require a seasoning of 1 year in the property before they will use a new value. Within that first year it is always lower of sales price or appraised value. You can start processing your loan application before the year is up, you just cannot close until the 1 yr anniversary.

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