Refinancing? This Could Be Crucial

You've made the decision to refinance your home. You've spent countless hours doing tons of research on current interest rates. You've done your homework and found that your loan to value (LTV) ratio makes you an adequate risk. According to your calculations, your debt to income ratio falls within acceptable guidelines. You've taken an analytical look at all the available lenders and checked out their history and their track record. You refused to be rushed into anything and carefully selected a mortgage that suits both your immediate and future needs.

So, now all you have to do is sit back and wait for the closing, right? WRONG!

There is one crucial step that many home owners overlook when refinancing their home. The lender frequently will require that your home be appraised, and if the lender doesn't require an appraisal, then the home owner should insist on one, or better yet, find a different lender, because an appraisal by a neutral third party is crucial to a successful mortgage refinance transaction.

You may think you have an accurate idea of your home's value because your neighbor five doors down sold their home recently, and theirs is almost the same as yours. Except that house has less bedrooms than yours. Or maybe they have a bigger kitchen. Perhaps you have a corner lot and the other house is in the middle of the block. Don't get me wrong, knowing about recent sales in your area can help you get a feel for what your home value might be. But just like you wouldn't have a mechanic fix your car based on the problems your neighbor is having with their car, you need to make sure your appraisal is personalized to your home.

I touched on this briefly but I think it deserves an in-depth explanation: I personally wouldn't trust a banker or lender that would refinance a home without an appraisal. Most lenders are totally trustworthy, but just like any other profession, there are a few bad apples out there. If a lender doesn't want to "bother" with an appraisal, I feel that there's a good chance that they are a fly by night scammer that will promise you the moon but you end up with nothing but their promises.

Most lenders have a list of appraisers they work with, and this usually shouldn't be a cause for concern. But I would beware of lenders that do not use a third party appraiser. Many fraudulent lenders seek inflated appraisals so they can boost the home's value and increase their profits. Again, these types of lenders promise much, deliver little and usually stay one step ahead of law enforcement.

To be on the safe side, find out your state's requirements for an appraiser's licensing and/or certification, and make sure your appraiser is currently holding an up to date certification or license. Check your appraiser's records at your state's appraisal agency to make sure they are in good standing. Ask your appraiser if they are a member of a recognized appraisal organization and verify their membership as well. You can also check with the Better Business Bureau to see if anyone has filed a complaint against your appraiser.

So, your lender is ready to refinance you, you've checked your appraiser, and they have a squeaky clean record, what's next? Your appraiser will work with you to try to come up with a time that is mutually beneficial to both of you. Some lenders may require the home owner to be on the premises during the appraisal, but in other instances, the home owner may not have to be home, but there usually has to be someone there that is eighteen years old or older.

Now that you've got the appraisal scheduled, it's time for you to get to work. Use some elbow grease to clean from top to bottom. Make sure that every corner, every hidden area of your home is spotless. Don't go on a major redecorating spree, but you'd be surprised at how much a room can be perked up if you spend a few dollars on items like new candles, a few throw pillows, or colorful place mats on a dining table. Of course, you're not going to hide any major flaws, but think of an appraisal as a "job interview" for your home. The appraiser is going to tell your lender whether or not your home is worth them taking a risk on you. By working to make a good impression. your home should pass the appraisal with flying colors.