When you buy a home, you have many fees to pay and not all of them pertain to the lender. There are third party fees you may encounter, including the mortgage appraisal fee. This fee covers the cost of the appraiser evaluating the property and coming up with a fair market value for it.
Typically, homebuyers pay between $300 and $500 for the appraisal. This amount can vary by location, appraiser used, and the type of home, though. It’s best to ask your realtor and/or mortgage company what the average cost of the appraisal is in your area, especially as it pertains to the type of home you are buying.
Keep in mind that you will likely have to pay for the appraisal upfront. In other words, you cannot pay for it at the closing – appraisers want the money upfront for their services.
Why the Appraisal is Necessary
You might wonder why you have to pay the mortgage appraisal fee, especially if a realtor is involved in the process. Wouldn’t the realtor and the bank be able to determine the value of the home?
There are several reasons you will need an appraisal no matter the type of loan you get:
- Lender’s protection – The lender is putting themselves out on a limb by lending you such a large sum of money. Since you put your home up as collateral, the lender needs to make sure that their investment is protected. In other words, they need to know they will be able to sell the home and make their money back should you default on the loan.
- The appraiser is the expert – No matter how much experience a realtor has or how much a lender knows an area, it doesn’t come close to the expertise the appraiser has to offer. The appraiser is out in the field and knows the right comparable properties to use in order to come up with the fair market value of the home.
- Your own peace of mind – Paying for a mortgage appraisal is important for you too. You want to know that you are making a good investment. What if you paid more for a home than it was worth? Right off the bat, you would be upside down on your investment. While the $300-$500 might seem high at first, it is well worth every penny in the end.
The bottom line is that the mortgage appraisal fee is mandatory and will benefit you in the end. You will know that you are paying an appropriate amount for the home and the lender will feel protected. You may be able to shop around for an appraiser, but for the most part, the lender chooses the professional for you. This is because lenders often have working relationships with various appraisers. The lender then knows the appraiser’s work and knows they can trust the values that they assign to a home. If you have your own appraiser, make sure you run it past the lender first to see if they will allow the use of your own professional.