What Are The Major Components Of A Mortgage Loan Appraisal?

A mortgage loan appraisal typically involves several major components aimed at determining the value of the property being financed. These components may vary slightly depending on the specific requirements of the lender and local regulations, but generally include:

• Property Inspection:
  A physical inspection of the property is conducted by a qualified appraiser. The appraiser examines the condition of the property, its size, layout, and features.
• Comparable Market Analysis (CMA):
  The appraiser researches recent sales of similar properties (comparables) in the same neighborhood or area to gauge the property's market value. This analysis helps determine how much similar properties have sold for recently, providing a benchmark for the subject property's value.
• Property Valuation:
  Based on the inspection and CMA, the appraiser determines the fair market value of the property. This valuation considers factors such as location, size, condition, age, and any unique features or amenities.
• Adjustments:
  If there are significant differences between the subject property and the comparables (e.g., one has a larger lot size or an additional bedroom), the appraiser makes adjustments to the comparable sales prices to account for these differences. This ensures a more accurate comparison.
• Market Trends and Conditions:
  The appraiser considers current market trends and conditions that may affect the property's value, such as supply and demand dynamics, interest rates, economic conditions, and local market trends.
• Final Appraisal Report:
  The appraiser compiles all the gathered information into a comprehensive appraisal report. This report includes details about the property, the appraiser's valuation methodology, the comparable sales used, any adjustments made, and the final estimated value of the property.
• Regulatory Compliance:
  The entire appraisal process must comply with applicable laws, regulations, and industry standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP) in the United States.

These components collectively help lenders make informed decisions about the amount of financing they're willing to provide for a property, based on its estimated value. Additionally, they help ensure that the loan amount is appropriate relative to the property's value, reducing the risk for both the lender and the borrower.

How Should A Mortgage Underwriter Review A Property Appraisal?

A mortgage underwriter plays a crucial role in the home buying process by reviewing various documents to assess the risk associated with approving a mortgage loan. When it comes to reviewing a property appraisal, here are some key steps a mortgage underwriter typically follows:

• Verify Appraiser Credentials:
  The underwriter begins by ensuring that the appraiser who conducted the appraisal is qualified and licensed in the state where the property is located. This ensures the credibility of the appraisal report.
• Review Appraisal Report:
  The underwriter carefully examines the entire property appraisal report. This includes studying the property's description, condition, and comparable sales used to determine its value.
• Assess Property Details:
  The underwriter checks if the property details mentioned in the report match the information provided in other documents, such as the sales contract and listing.
• Evaluate Comparable Sales:
  The underwriter assesses the comparables (similar properties recently sold in the area) used by the appraiser to determine the subject property's value. They ensure that the comparables are appropriate and sufficiently similar to the subject property.
• Analyze Adjustments:
  If the appraiser made adjustments to the comparable sales to align them with the subject property, the underwriter verifies the accuracy and validity of these adjustments.
• Consider Property Condition:
  The underwriter takes note of any significant issues or discrepancies in the property's condition mentioned in the appraisal report. They assess whether these issues affect the property's value or the loan's risk.
• Check for Compliance:
  The underwriter ensures that the property appraisal complies with the lender's guidelines, as well as any applicable regulations such as those set by Fannie Mae, Freddie Mac, or the FHA.
• Request Additional Information:
  If the underwriter identifies any inconsistencies, discrepancies, or incomplete information in the appraisal report, they may request additional documentation or clarification from the appraiser.
• Assess Market Conditions:
  The underwriter considers current market conditions and trends that may impact the property's value, such as changes in property prices or supply and demand dynamics in the area.
• Final Decision:
  Based on their review of the property appraisal and other relevant factors, the underwriter makes a decision on whether to approve, deny, or conditionally approve the mortgage loan.

Overall, the underwriter's goal is to ensure that the property appraisal is accurate, reliable, and supports the lender's decision to approve the mortgage loan while mitigating the lender's risk.

What You'll Learn

Our "Appraisal Review Workshop" is an in-depth, instructor-led online program on the details required in each section of the real estate appraisal.

It is designed to teach the fundamentals of real estate appraisal to new and seasoned mortgage processors alike.

Course Outline

In this course you'll learn what to look for to prevent fraudulent appraisal practices, sales comparison/income/cost approach, and more, including:

• Details on what the industry looks for in these reviews to prevent fraudulent appraisal practices.
• Information that enables Underwriters to determine if there is fraudulent information provided with regard to Comps used or Sales History.
• Review of the schedules attached to Appraisal Comps Map, Floor Plan Sketch, USPAP Addendums, and any Addendums that provide detailed information on the "Special Aspects" of the subject property being reviewed.
• Details of most recent changes that agencies have required.
• Review the 1004C Market Addendum in full detail to show how the information on this Addendum must support the information on Pages 1 & 2 of the URAR.

Upon finishing the course you will receive a Certificate of Completion and the skills required to be a successful mortgage processor.

Anticipated Time To Complete

This online course will take approximately three hours to complete. You do not have to complete the course in one sitting - there are bookmarks in this course that allow you to stop and restart as needed.

Access Information

Upon enrollment, you'll receive an email from the course provider (CampusMortgage®) with links and passwords to access the course. You will have access to the course materials for one full year.