Your Property

What is an appraisal and who completes it?
Appraisals are done to determine the value of the property you are purchasing or refinancing. They are used by the mortgage lender to determine the value of the property which helps support the loan decision. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal; they also specify the appraiser´s qualifications and credentials. Most states now have licensing requirements for appraisers evaluating properties located within their states. As a result, Pride will only work with and recommend only licensed well qualified appraisers.

The appraiser will create a written report for Pride which you´ll be given a copy of after your loan closing. After the appraiser inspects the property, they will compare the qualities of the home with other homes that have sold recently in the nearby community. These homes are called “comps” or "comparables" and play a significant role in the appraisal process. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of the property. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.

The appraiser also estimates the replacement cost for the property to be used as an additional check. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size with forecasted construction costs. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration.

Investment properties: If your home is for investment purposes, or is a multi-unit home, the appraiser will also consider the rental income that will be generated by the property to help determine the value. Using these three different methods, an appraiser will frequently come up with slightly different values for the property. The appraiser relies on judgment and experience to reconcile these differences and then assigns a final appraised value. The comparable sales approach is the most important valuation method in the appraisal because a property is worth only what a buyer is willing to pay and a seller is willing to accept. It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract will the appraised value be very different.

What does the underwriter look for when it comes to the appraisal?
The underwriter actually validates the entire file against the appraisal to see if it makes sense. In addition to verifying that your home´s value supports your loan request, we´ll also verify that your home is as marketable as others in the area. We´ll want to be confident that if you decide to sell your home, it will be as easy to market as other homes in the area.

We certainly don´t expect that you´ll default under the terms of your loan and that a forced sale will be necessary, but as the lender, we´ll need to make sure that if a sale is necessary, it won´t be difficult to find another buyer.

We´ll review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 10-acre lot, or has a large accessory building, we´ll want to make sure that there are other homes in the area on similar size lots or with similar outbuildings. It is hard to place a value on such unique features if we can´t see what other buyers are willing to pay for them. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it is more difficult to find homes that have similar features.

We´ll also make sure that the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell.

We´ll also review the market statistics about your neighborhood. We´ll look at the time on the market for homes that have sold recently and verify that values are steady or increasing. There are a number of key items of interest on an appraisal and our team of underwriters review them all very carefully.

Will I get to see my appraisal?
As soon as we receive your appraisal, we´ll update your loan with the estimated value of the home. The closing package usually has a copy of the appraisal and most settlement agents will afford you the opportunity to review the appraisal at the closing. Finally, as a standard practice, Pride is happy to provide a copy of your appraisal within 2 weeks of your closing.

What sort of special requirements are there for Condominiums?
There are some additional steps that must be taken to determine if condominiums meet our guidelines. Condominiums often have some distinct issues from single family and multi family home. Value and Marketability being two key issues. As a result, Condos are more expensive and require more work to appraise.

One of the most important factors is determining if the project that the condominium is in is complete. In many cases, it will be necessary for the project, or at least the phase that your unit is located in, to be complete before we can provide financing. The main reason for this is, until the project is complete, we can´t be certain that the remaining units will be of the same quality as the existing units. This could affect the marketability of your home.

Also, we´ll consider the ratio of non-owner occupied units to owner-occupied units. This could affect future marketability of not only your unit but the entire project. The logic is that most people would prefer to live in a project that is occupied by owners rather than renters.

We´ll also carefully review the appraisal to insure that it includes comparable sales of properties within the project, as well as some from outside the project. Our experience has found that using comparable sales from both the same project as well as other projects gives us a better idea of the condominium project´s marketability.

Depending on the percentage of the property´s value you´d like to finance, other items may also need to be reviewed. The underwriter will condition for these during the loan process

Do I need a home inspection?
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you´ve found the perfect home.

The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported. However, appraisers are not construction experts and won´t find or report items that are not obvious. They won´t turn on every light switch, run every faucet or inspect the attic or Furnace. This would be the reason for a home inspection. Home inspectors generally perform a detailed inspection and can educate you about possible issues or defects with the proposed home. We recommend that you accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home. Home Inspections are not required for financing and are generally used by the prospective home buyer to satisfy their sense of value and uncover any large or small home defects/problems. Please ask you Realtor or loan officer for more details or if you would like the name of a qualified home inspector.

How long does it take for a property appraisal to be completed?
Pride only works with and recommends licensed well qualified appraisers. The Licensed appraisers who we recommend are generally familiar with homes in your area; they understand the values and general appraisal issues for your area. We order the appraisal as soon as the application fee is paid. Generally, it takes 7-10 days before the written report is returned to us. Your loan officer or processor will follow up with the appraiser to insure that it is completed as soon as possible. If you are refinancing, and an interior inspection of the home is necessary, the appraiser should contact you to schedule a viewing appointment. If you don´t hear from the appraiser within seven days of the order date, please inform your Loan Officer. If you are purchasing a new home, the appraiser will contact the real estate agent, if you are using one, or the seller to schedule an appointment to view the home. Sometimes only a drive by appraisal is required for your loan to be approved; if this is the case, no one will contact you to enter the residence.

Do you require Flood Insurance for all properties?
The quick answer is no. However, Federal Law does require all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure that you will be protected from financial losses caused by flooding. Floods happen anytime, anywhere. As a result, Pride will make sure that you and the lender are protected. We use a third party company who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner´s insurance doesn´t protect you against damages from flooding. Ask you local Insurance agent for a quote on flood insurance.

Does Pride Mortgage finance manufactured homes?
Yes we do! However, let’s determine what we mean by “manufactured homes”. Pride defines manufactured housing as housing units that are factory built with a steel undercarriage that remains as a structural component and limits the structure to a single story. These types of manufactured homes are sometimes known as mobile homes. We do not consider other factory-built housing (not built on a permanent chassis), such as modular, prefabricated, panelized, or sectional housing, to be manufactured housing. If your home is one of these types, please complete the application indicating that your home is a single family home.

In order to qualify for our loan programs a manufactured home must meet the following requirements:

•Be a one-family dwelling that is legally classified as real property. •The towing hitch, wheels, and axles must have been removed and the home must be permanently attached to a foundation system that meets state and local codes as well as the manufacturer’s requirements. •The land on which the manufactured home is situated must be owned by you. We do not provide financing for manufactured homes located on rented or leased land. •Must have been built in compliance with the Federal Manufactured Home Construction and Safety Standards that were established June 15, 1976. Generally, compliance with these standards will be evidenced by the presence of a HUD Data Plate that is affixed near the main electrical panel of the home or in another readily accessible and visible location. •Must be at least 12 feet wide and have a minimum of 600 square feet of gross living area and should be similar to other homes in the area.

Ask a Pride Mortgage loan officer for more details