Appraisal Standards Change And This WILL Affect Your Next Mortgage

Big Changes in Conventional Appraisal Standards Began September 1

Appraisals continue to be the knothole in a lot of real estate transactions. Underwriters and lenders struggle to make sense of the hodge-podge of commentary and adjustments on appraisals as well.

In an attempt to provide consistency and accuracy to the appraisal process, Fannie Mae and Freddie Mac have implemented the UMDP (Uniform Mortgage Data Program) and, ready or not, it rolled out on all appraisals completed on or after September 1, 2011. (FHA has issued guidance that they will follow suit with all case numbers issued January 1, 2012 and after.)

Obviously, the appraiser's job changes with this. But what does this mean to the rest of us - REALTORS, Sellers, Buyers, Refinancing Homeowners? 

While it is the most common source used for information gathering on comparable sales and currently, the MLS may or may not provide all of the data that appraisers will now be required to report. Therefore, they will have to call the listing REALTOR to get it. This could slow things down a bit, and prompt responses by all will be very important to getting appraisals completed on a timely basis.

Some of the significant data changes include the way the following items are reported:

• Days On the Market
• Offering Price
• Sale Type
• Financial Assistance
• Site Area
• Property View
• Property Style
• Condition of the subject property
• Sale Date of Comps
• Quality of Construction (This is one of the biggest changes being made!)
• Basement and Finished Rooms Below Grade
• Appraisal Management Company Reporting

Home sellers will need to help their REALTOR with the gathering of some of the above data points. They need to make known what improvements, especially kitchen & baths, have been made and the costs of those improvements. 

Home buyers and home owners taking advantage of the current rate market to refinance their home may face a longer lead time as these changes are put in place.

On a final note:  Despite all of these changes, nothing takes the place of the Underwriter’s review in the process. It is ultimately the underwriter who is held responsible for insuring that the appraisal is acceptable and supports the value. There is a process that takes place once the appraisal is in that tests the appraiser’s result against an automated valuation model for QC purposes. If this process detects that there are other, potentially closer or more recent comps, it will red flag the appraisal data. The underwriter may then have to further investigate value through the use of a review appraisal or by getting additional information from the current appraiser. So, it’s never over these days until we have a firm commitment from the Underwriter. At Fairway, we have in-house underwriting so we can reach out if needed.

Note to REALTORs: We have developed a Cheat Sheet for our REALTOR partners to use. It will be a great supplement to your listing appointments and your work in writing purchase agreements.

Please contact me to learn more about the high points of the specific changes to the appraisal process and how Fairway can help keep your transactions moving smoothly to closing.

Tim Epps

Sr Loan Officer
918-528-4010

What Do You Want to Know About Mortgages?

I am turning over the content of my next few posts to answering your questions.

What do you want to know about mortgages? This is your chance to get answers in plain English.

Do you want to know about:

• Qualification
• Rates
• Loan types & terms
• Rent vs Buy
• How to select a mortgage professional/REALTOR, etc.
• Should I refinance
  

I will provide straight-forward answers to your pressing mortgage questions. Send an e-mail to tim@myfairway.net or call me with your question. Your contact information and any personal identifying information will be kept confidential.

Tim Epps
918-528-4010
tim@myfairway.net

What Is Today's Mortgage Rate?

When you ask a mortgage professional what his rate is, you must first know if you are rate shopping or evaluating a professional. Borrowers shopping for the lowest rate are almost always guaranteed to pay more for their loan - either in rate, fees, or both. Borrowers who are evaluating what mortgage professional they want to work with are much more likely to get the best loan available for their needs and circumstances. That is, if they understand how to make their evaluation.

A lender who blindly quotes a rate, who responds immediately to your rate question with "4.75%" or "I can get you 4.x", is being dishonest at worst & disingenuous at best. Mortgage rates are not like produce prices, posted in the grocery store for all to see and available to all buyers. Many factors go into getting the best mortgage for you.

Some factors are based on your circumstances:

1. Your credit score
2. Your down payment (or loan-to-value for refinances)
3. The amount of your loan
4. Are you ready to lock your rate now?
5. How long before you need to close?
6. Are you a teacher, veteran, policeman, fireman, first time home buyer, etc?

Other factors are based on your needs:

1. How long do you plan on living in this home?
2. Do you plan on refinancing in the future?
3. Do you prefer a lower payment or lower costs?
4. What is your tolerance for risk?

Only an open, honest conversation with a mortgage professional will illustrate how each of these factors influence the mortgage rate that is available on the best loan for you.

If you are in the market for a home now and would like to discuss your situation or if you have a home and would like to see if you can save by taking advantage of rates near historic lows, contact me. There is no obligation. You owe it to yourself to see what a proper mortgage interview can do for you.

Tim Epps
918-528-4010
tim@myfairway.net