Your Home Doesn’t Appraise for the Buying Price
“The lender requires an appraisal on the home because the home is the collateral for the mortgage loan,” Thomas said.
“The home loan is based on a percentage of the appraised value. For example, if putting 20 percent down, the lender is lending you 80 percent of the purchase price or appraised value, whichever is lower. If the home appraises low, the lender is going to reduce the amount you can borrow.”
You will have three options at this point, according to Thomas:
- Bring the difference in purchase price and appraised value, which increases your down payment.
- Negotiate with the seller to lower the purchase price to the appraised value.
- Walk away if the first two options don’t work.
