What’s the Difference Between a Home Inspection and Appraisal?
If you are in the process of buying a new home or at the start of your search, you might wonder why you would have both, a home appraisal and a home inspection. They sound a lot alike. But while your lender requires an appraisal to protect their interests and to make sure you don’t overpay for your house, a home inspection is something that you choose to do. It helps identify any defects that need to be repaired before or after closing. Here are the main differences between an appraisal and a home inspection:
A Home Inspection
The lender’s appraisal does not replace the need for you to have your own inspection of your new home. You can choose an inspector or ask your real estate agent for a recommendation. This inspection focuses on the current condition of the home and will cover minor defects as well as the major ones. Here are some of the features of a home that an inspector will evaluate:
- Condition of the foundation, basement and sidewalk
- Age of the roof and when it might need to be replaced
- Plumbing, electrical, heating and cooling systems
- Any past water damage
- Possible insect infestations
- Condition of floors, windows and doors
- Amount of insulation in the attic
An inspection will give you a deeper understanding of the home you want to buy as you continue with the purchase process. You probably want to be there for the inspection, although you will get a written report after the inspector is done. The report will identify any risks or health concerns that might impact your decision to buy the home or pay the price you offered. If major problems are found, you can always try to negotiate with the seller to make the repairs or reduce the price of the home. Your inspection report will also provide you with suggestions for minor repairs that can be made after the closing.
While the lender’s appraisal is required, a home inspection is not. But even in this competitive real estate market for buyers, it is wise to have a home inspection.
The Home Loan Appraisal
Your lender will choose a qualified appraiser and will set up a date and time for the appraisal. You don’t need to be there during an appraisal. The appraiser will look at both the inside and outside of the home to determine the:
- Age
- Square footage
- Number of bedrooms and bathrooms
- Lot size
- Location
- Any amenities such as a pool or an in-home gym.
The appraiser will then compare it to current real estate market data on what similar properties in the area sold for during the past 90 days to come up with a fair market value for the home.
The appraised value of the property you wish to purchase should not be lower than the amount of the mortgage you plan to borrow. If the home does not appraise at or above this amount, you can ask your realtor to provide sales data on similar homes to show that your home might have been inaccurately appraised.
You may also be able to renegotiate the sale price with the seller or pay the difference at closing. If you are willing to pay the difference, it must be paid upfront at closing and not financed as part of the loan. However, if the amount is significant, it could affect the terms of your mortgage agreement.
Would you like to learn more about the process to get a no-money-down VA home loan? NewDay USA can help. Call us today at 800-405-4187 to learn more about any of our VA home loan products.