Bank Requirements for a House Appraisal

Lenders frequently disapprove mortgages over low home appraisals.

Lenders frequently disapprove mortgages over low home appraisals.

To qualify for a mortgage loan you'll generally need an appraisal of the home you'd like to purchase with that loan. Additionally, home appraisals might be required for mortgage refinancing as well as for reverse mortgages or other mortgage loan products. Mortgage lenders require a home appraisal to ensure the mortgage applicants' hoped-for home is actually worth what they're asking to borrow. Mortgage lenders also tend to require a specific type of home appraisal when it comes to most mortgage applications.

Summary Appraisal Reports

The most common home appraisal required with residential mortgage applications is the summary appraisal report. Summary appraisals give residential mortgage lenders details about a property's characteristics and some explanations on how the appraiser arrived at the value opinion. Normally, mortgage lenders' underwriters only need home appraisals to supply general characteristics of those homes and how they affect their value. But mortgage underwriters don't need extremely detailed home appraisals filled with statistics they don't want to read anyway.


Summary appraisal reports allow appraisers to effectively formulate their value opinions and lenders demand their accuracy. For example, an appraiser looking at a home usually compares it to similar homes in the surrounding area and what they've sold for recently. In residential appraising, comparing a home under appraisal to homes similar to it that recently sold is an effective appraised value determination tool. An appraised home's comparison homes are known as "comparables" or simply "comps."

Mortgage Disapprovals

A home appraisal that comes in below a mortgage applicant's requested loan amount can cause the mortgage application to be disapproved. Low home appraisals and subsequent mortgage lender mortgage application disapprovals cause many real estate sales to fall apart. At minimum, a low home appraisal can mean the buyer might have to cover more of the purchase price. However, a low home appraisal could also lead to new negotiations between buyers and sellers and a new or revised sale price.

Who Pays

Homebuyers normally pay for their home appraisals, not sellers. Buyers might be required by their mortgage lenders to pay for their home appraisal upfront or as a part of buyer closing costs. By law, mortgage lenders must maintain "arm's length" distance from appraisers, and those appraisers are lenders' third-party vendors. Essentially, mortgage lenders and appraisers can't get too cozy with each other, and lenders also can't add their own fees to the cost of home appraisals.

About the Author


Photo Credits

  • Jupiterimages/Brand X Pictures/Getty Images
Suggest a Correction