I did ask a separate question yesterday re: appraisal so I apologize if this is too spammy. Feel free to delete if this isn’t allowed.
I made an offer for $700k on a listing price of $600k. We had to put an appraisal addendum, as good property just doesn’t go under contract without those here in Austin (you can get a property without the addendum if the property needs a lot of work, according to my realtor). We can afford it so don’t worry I’m not here on a buyer’s remorse rant about my appraisal addendum. I know full well it could cost me more money and I’m OK to pay it as we have a child on the way and need more space, pronto.
I wanted to stick to a conventional loan instead of jumbo, as the interest rates are favorable. This means we can only finance 548,250 according to lender, based on settings by Fannie / Freddie. That’s the Texas limit, I believe. This means that my down-payment will be roughly $152,000, putting me at a 22% downpayment, 78% financed/LTV.
Here’s the question:
$548250 is 80% of $685,312.5 – Does this essentially make $658,312.5 our “appraisal target” and not $700,000? Because it seems like the amount financed stays the same, so my assumption is our down-payment stays the same, and our equity takes a dip, but according to my lender, the appraisal is mostly a tool to gauge their liability. The lender told me on the phone “a house is worth what someone will pay. We just have rules to cover us in the event of default, and if we don’t order appraisals on certain properties, the big three won’t back us on the mortgage.”
To take it a step further, is my math correct in the following scenario?
Say the house appraises for $650k. They would then underwrite mortgage for 80% of that, which is $520, which make the gap between $520 and $700 our new downpayment – $180,000?
Offer of $700k, conventional loan in Texas (with limit of $548k), making our downpayment $152k, and 22% downpayment. Does this mean our cost due at closing likely remains unchanged unless the house appraises for less than $685k?