These days, many home buyers may be unaware of how the appraiser and the underwriter come into play during the home loan process. In fact, the fate of a loan application can hinge on how things play out between the appraiser and the underwriter.
The main role of the appraiser is to figure out the true value of a property. Most appraisers should be state-licensed or have other qualifications or certifications (not all are licensed). A licensed appraiser will follow the code of ethics and rules of conduct set forth by The Appraisal Foundation. Alternately, the underwriter’s role is as the supervisor of the loan and will also figure out if an applicant can truly afford a mortgage. He or she will need to gather proof of creditworthiness from an applicant and uncover any false or misleading statements made on the loan application. To do this, the underwriter will refer to the three major credit bureaus: Experian , Equifax, and TransUnion.
At the beginning, the appraiser will inspect the property, looking inside and out. He or she may make note of anything that looks less than ideal and may even take pictures. The appraiser will also look at “comps” (recent sales of nearby homes that are comparable to the one being appraised) to figure out what other similar houses are going for in the area but will also take into account any special attributes the property may have.
Once the underwriter receives the appraisal, he or she may discover issues on the credit check or the appraiser’s notes about the condition of the property. Although there are no hard-and-fast deal-breakers at this stage, the underwriter must weigh the pros and cons of granting the loan.
Finally, the underwriter may ask the appraiser to give clarification on what was in the appraisal or will ask the applicant to settle old bills. The underwriter will then take a second look at the application and either require more documentation, a second appraisal, or will ultimately make the final decision on the loan acceptance or denial. Although the underwriter wants to help good applications get approved, it’s also his or her duty to make sound financial decisions so that no one suffers in the long-run.
It’s important to remember that a smooth home loan process will have qualified applicants, licensed appraisers who are knowledgeable of the markets they work in, persevering real estate agents, as well as responsible and fair mortgage lenders who know every applicant’s situation is unique. To learn more about your rights, read our blog post about Fair Lending.
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