In order for you to know how much money you’ll get from your reverse mortgage, an appraisal must be done. One of the last components of the reverse mortgage process, the appraisal determines the actual market value of your home. This market value gives us an idea of how much someone would pay for a similar home in the same area. Since this value (along with your age) is used to determine how much money you qualify for, appraisals are necessary for closing your loan. The appraisals that are conducted for a reverse mortgage are specific Federal Housing Administration (FHA) Reverse Mortgage Appraisals.
The Appraisal Process
There are three steps in the appraisal process:
- A licensed FHA appraiser in your area will come to your home and perform an inspection. Keep in mind that you may not choose your own appraiser. Your reverse mortgage company cannot choose one for you either. The Appraisal Management Company (AMC) chooses an appraiser for you within 24-48 hours after your folder is received.
- The appraiser will research similar homes in the area and compare recent sales. He or she will also compare such items as the number of bedrooms and baths, types of garages, and additional home features including a deck, fireplace, and heating or cooling system.
- The appraiser will gather all of these findings and submit a final report and final valuation.
Types of Appraisals
There are four ways an appraisal for reverse mortgage is issued.
- As is. This means there are no repairs, alterations, or inspections that need to be completed. Your home may be in perfect condition or may only need minor repairs.
- Subject to repairs or alterations. This means that the appraiser has noted some repairs and alterations that must be addressed, before the closing of the loan. You may also get this appraisal if you have a home that’s under construction, but is at least 90% complete. This means the home only has minor finish work left to do, for example installing appliances, finishing landscaping, and putting in fixtures.
- Subject to required inspection. This means that an inspection must be completed before moving on. The appraisal will list specifically what needs inspection.
- Subject to completion per plans and specs. These are for homes in the building process that are less than 90% complete. These appraisals are not currently accepted for reverse mortgages.
If you already have an appraisal we may be able to use that under certain conditions. The previous appraisal date must be less than 120 days from the closing date. Remember that appraisals for reverse mortgages are good for four months. The appraisal must also be an FHA reverse mortgage appraisal. You can find out if your existing appraisal will work by contacting one of our licensed experts.
Questions about Appraisals
If you have more questions about appraisals, check out our past blog post, “Appraisal Facts with a Reverse Mortgage.” You can also call one of our licensed experts, who are knowledgeable about this very topic. They are here to answer any questions you may have about reverse mortgages.