An appraisal report provides an opinion of value of a house using the most recent market data. Lenders base loan amount and property eligibility on the appraisal, making up-to-date reports a key factor for approval. Appraisal guidelines vary by lender and loan program, but the majority of mortgages are conventional or government-backed. Fannie Mae, Freddie Mac, the Federal Housing Administration and the Department of Veterans Affairs determine how long an appraisal is good for when shopping mortgages.
Borrowers typically shop their mortgage options before securing a property. Lenders approve loans subject to appraisal, and because appraisals cost between $250 and $500, most borrowers wait until the home is under contract to get one. Appraisal protocol requires lenders to choose the appraiser, thereby preventing buyers, agents and mortgage brokers from influencing appraisal results. Although you may conduct an appraisal before settling on the lender, most lenders reject appraisals ordered outside of the transaction.
Most mortgages are drawn up under Fannie Mae and Freddie Mac underwriting guidelines. The validity period for conventional loan appraisal reports is four months, or 120 days, for existing homes. Proposed constructions or new home appraisals are good for up to 12 months. The appraiser compares the home to closed sales of comparable properties within the past three months. If an appraiser can't find at least three properties that sold within that window of time, he may expand his search to include slightly older sales.
FHA lenders may use an appraisal for up to four months on existing homes and up to 12 months on new homes. FHA appraisals work differently than conventional appraisals. Once an FHA appraisal is conducted on a home, the appraisal remains the authoritative valuation for the home until it expires. This rule prevents borrowers and lenders from ordering different appraisal inspections on a single home to achieve specific results. It requires a borrower to use the same appraisal for a home with a different lender if he chooses to change companies. If the buyer changes, the FHA lender must use the same appraisal.
The VA orders appraisals for its mortgage-guarantee program. Once the report is complete, the VA assigns a certificate of reasonable value. The appraisal is valid for up to six months on existing construction and 12 months on new homes. The VA backs loans made to eligible veterans and certain relatives of veterans. The VA certificate of reasonable value is good for any qualified veteran and transaction. In the event the borrower or lender changes, the VA uses the same value for the home.
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