Mortgage Refinance – Determining Your Home’s Value First
By: Matt Borkowski
Perhaps you are looking to refinance your home as rates continue to drop. With this crazy real estate market you may be worried about your home value if you choose to go forward with a refinance.
One thing I want you to understand is that you are much more involved in your home than the lender will ever be. The lender simply wants to refinance your mortgage and have that loan backed by the true value of the home.
To do this the lender is firstly interested in factual data. It is secondly interested in a licensed appraiser’s fuzzy opinion.
Most residential property valuations are based upon the market analysis approach. What this means is the lender wants to find similar properties as yours which have sold recently (ideally 6 months of less) within your subdivision or up to about one mile away from your home.
A similar property to yours is self explanatory. A perfect comp would be a replica of your home in your subdivision.
What you want to do is to avoid websites which claim they can do instant comparables for you. They are totally bogus, and I haven’t seen one that is even close to accurate.
The next thing you can do is go down to the appraisal district or recorder’s office and find similar sold properties to yours in your subdivision and surrounding area within the last 6 months. The folks there can help you do this. You want to make sure you have similar square footage, similar structure, and the comps were built within a 5 year window of your home.
The second part of the equation is that mortgage companies do rely on the appraiser’s fuzzy opinion. This is all about the added value an appraiser gives the home based upon its location, lot size, upgrades, and floor plan. This is very subjective which is why lenders go mainly on data.
When determining this you cannot give dollar for dollar increases in value if you happen to put hard wood floors in your living areas. At best you can give it 50 cents per dollar. And don’t give your pool more than $10,000 in value. I know it was $30,000, but that’s the way it goes.
If you want to save yourself tons of time and really get a bird’s-eye view of your home’s value call up your realtor and have her do a comparative market analysis. It takes her 5 minutes to do this, and she will probably be able to give you a better idea of value than you could anyway.
Head to Matt's website for Austin mortgage and home loan refinance. Also, for you Texas reverse mortgage folks, get one heck of a guide right here.
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