How Does “Low Appraisal” Work?

We have a quick Q and A Friday that we have been doing for years now.

We love bringing these to you guys and the questions that we get all the time. This is something that we've been getting over the years and I think we've talked about like three years ago honestly. But I wanted to bring this up again and it was appraisals. It has to do with low appraisals. When a low appraisal comes in, people always ask, we get this all the time and it's a very good question. It's a common question -

"When there's a low appraisal and someone's putting down a down payment - if that's $250,000 and someone's putting $10,000 down and the appraisal comes in at $245,000, then shouldn't it only have to appraise for $240,00?"

When you think you're paying it all

The big thing to kind of realize here is that the bank is actually the one purchasing the home at closing. When you go to close on it, you're the one living in it, but you're paying your rent, your mortgage to the bank, to the lender. They're the ones purchasing homes. They're putting the whole to $250,000 down to purchase a home at that time paying off the previous lender, whoever's owned, owning the home, whoever's has it previously. They're paying that off at closing in full. And that's when you then, "Oh!" So that's what you are going to pay on through the course of the loan, pay off over the next 30 years.

So I hope that gives you a little idea. Again, I want to keep this short. It's a question we get all the time, but it's a very common question. It's a simple answer - "They are paying at closing that entire amount."

It's a different story

So $250,000 is being paid that entire time or $245,000. Just because someone's paying a down payment it doesn't decrease what the appraisal has to come in at. The money that someone's putting down upfront is just - that little portion is basically that first couple of months payment, in essence, depending on the size of the home. It's just their first couple months of payment down towards that whole large amount, that $250,000, that $245,000. That comes in that they need to then pay over the course of 30 years.

I hope that makes sense. Let me know if you have any questions about that. It's just a question that we get all the time and I want to shed a little light on it. It's something that's not talked about really that much at all. And I just, I want to again, be that source that you can go to and that's what our team's here for. I appreciate you guys, all the questions that you guys have given us a little bit over the last three, four or five years we've been doing these videos now for three years. I appreciate all of the questions. We still have literally dozens of questions and I just can't wait to continue answering those. When you do have questions, comments, or concerns, please try to do your best to put them in. If you feel comfortable enough to put them into the comment sections, whether it's YouTube or Facebook here, that way everyone can learn at the same time. We can all learn together, get questions answered on the timeline because we love the direct messages and the private messages, but then we can only help one person at a time. So, if you feel so compelled to share on the timeline, that'd be great. That way we could help the most amount of people possible. So appreciate you guys more than anything. Your time, your attention, energy, it's the most important thing we have. We look forward to seeing you again soon and hope you guys have an awesome weekend.