Home Appraisal Value

by Matt R
(Cedar Rapids, Iowa USA)

Ask Kate how home appraisal value determines your need for PMI: Hi Kate, I'm buying my first house. My question has to do with determining the value of the house and whether I'll pay or avoid PMI.
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Matt continues... I'm looking for a good value in my house hunting, in order to walk into some instant equity and also avoid paying PMI (private mortgage insurance), if possible. With every house I'm interested in, I always check the assessor's website to see what the house has been assessed at recently.

Is this a good tool to attempt to determine the value of the house and how much equity I will have or, with the bad economy, are these values often inaccurate even if listed as the 2010 value?

For example: I was looking at a short sale house that was assessed at 190k in 2010. The asking price was 165k.

My thinking was if I could get it at a price where, after my down payment, the mortgage was for 152k or less (80% of the assessed value) that I wouldn't have to pay private mortgage insurance.

Through the course of looking into the house, my Realtor got information from the selling Realtor that they determined the fair market value to be 171k. If this is the value of the house, it completely throws off my thoughts of not paying PMI unless I can get the house significantly cheaper than the asking price.

What value does the bank use to determine the value of the house and whether or not I will have to pay PMI?

Is there a good way for me to determine or estimate the value before I buy so I have an idea of how much equity is in the house?

Thanks for your help.

Kate Answers: Does county assessment or home appraisal value determine paying PMI?


***zz-portrait-left.shtml*** Dear Matt, County assessments determine the amount homeowners pay in property taxes.

If you want to know current property taxes, the county assessor's report is just what you are looking for! But it does not reflect the market value, at least in the eyes of a mortgage lender.

Mortgage lenders rely on market appraisals when determining the value of residential properties.

Calculating Home Appraisal Value

A market appraisal compares at least three similar homes. After the appraiser completes complex calculations and submits their report to a lender, a loan approval is issued which includes loan amount, down payment and PMI information.

Sidebar: Go here if your mortgage approval develops hiccups.

Will You Pay Or Avoid PMI?

Wondering how a lender determines whether or not you'll pay or avoid PMI? Down payment divided by appraised value.

Example: $20,000 down payment / $100,000 purchase price = 20%. Less than 20% and the vast majority of conventional home loan programs will require private mortgage insurance.

I have also included more PMI information near the end of this page. Be sure to check out my articles. You'll find ones spelling out the truth about PMI cancellations and more.

How Can YOU Determine Home Appraisal Value

Matt, you also asked what measures you can take to determine the value of a home. Choose a real estate agent who ALWAYS provides a comparative market analysis (CMA) on each home you are interested in buying.

This is not to say a CMA will be identical to the eventual home appraisal. But it will give you valuable information to assist in making offers based on real-time data instead of impulse and emotion.

More here on How Can I Cancel PMI.

One more thing, Matt. I'd like to hear back from you. Let me know if this page was helpful to you. Comment here on Home Appraisal Value And PMI.

Or Ask Kate another question here.

Best wishes,

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