Why Isn’t My Loan To Value Based On The Appraisal?
FAQ: Why Isn’t My Loan To Value Based On The Appraisal?
Many homebuyers are surprised to find that they do not automatically have a down payment built into a home they are buying for less than the market value. If you are buying a $130,000 home for $100,000 the lender is typically going to base your mortgages loan to value ratio on the lesser of the appraised value, or acquisition cost.
The appraised value can be used when the borrower wants to take some equity out of the house after the purchase. Since the lender looks for the current market value, which is provided by the appraisal report, the borrower is able to use the equity after the purchase transaction. However, the borrower needs to be careful when he/she wants to take the equity right after the purchase because some lenders would like to see some seasoning on the property before letting you borrow some money against the equity.