Appraisals and Underwriting

After you've submitted all of your paperwork, your lender will begin underwriting your loan. The underwriter will go over all of the facts on your mortgage application and accompanying documentation to ensure that everything is correct and meets the requirements. Your application must meet your lender's requirements and those of your loan's investor — the entity that provides funds to your lender for your mortgage. Underwriting your loan takes a week or two on average, but any third parties engaged in the process, such as the appraiser, might cause delays.

Who is the financial backer of my loan?

Your loan's investor is usually defined by the type of loan you're taking out. The Federal Housing Administration is the investor for FHA loans. For VA loans, it's the United States Department of Veterans Affairs. The investors for conventional loans are usually either Fannie Mae or Freddie Mac — two government-sponsored enterprises created to stimulate the housing market.

You'll need an appraisal to establish the worth of your property, just like when you bought it. The appraiser will inspect your property and compare it to similar, previously sold homes in your region to get an opinion of its worth.

Your lender may not require an appraisal for your refinance in some instances. For example, if your home was appraised within the last 120 days, the appraisal may be waived.

What is the cost of an appraisal?

The majority of assessments cost between $200 and $600, but keep in mind that the price can go higher.

The property's nature and location determine the cost of an appraisal. If you own a multiunit property rather than a single-family house or reside in a rural area, your assessment may be more expensive.

Lenders can't typically lend more than your home's evaluated value, so a low assessment can make refinancing difficult. If your appraisal is low, you might have the following options:

• Reduce the refinance amount: You may need to bring cash to the table to offset the gap between the loan amount and the property value in some situations. In some circumstances, such as a cash-out refinance, you may be able to reduce the loan amount
• Cancel the refinance: If your home's value is low, refinancing might not be the best option right now

Your appraisal is higher than or comparable to your expectations in the best-case situation. You may still be responsible for the appraisal fees and any other lender fees if you cancel the refinance due to a low appraisal value. That's why it's critical to conduct preliminary research to determine the value of your home.