Early in the process of a Home Equity Conversion Mortgage or HECM reverse mortgage, your lender will obtain an appraisal of your home to estimate its value. The appraisal is necessary because it helps your lender determine whether you’re eligible for a reverse mortgage as well as the loan amount you’ll qualify to receive. In addition, the appraisal also can affect whether you’ll need to provide additional funds when the loan closes.
Your lender will hire an appraiser who is certified by the FederalHousing Administration (FHA). An appraisal generally includes three steps: market research, inspection and analysis.
In addition to these three steps, the appraiser also will make sure your home meets FHA’s guidelines for health and safety, property type, construction, zoning and condition.
You may have spent considerable money on renovations in a kitchen, bathroom or other area of your home. Those improvements may add to the appraisal, but they probably won’t transfer dollar-for-dollar to your home’s value. Variations in the housing market also will affect your home’s value, and that can affect the value of renovations as well. Typically, kitchen renovations have the most return on investment, but again, the money spent on a renovation may not be returned in full with the appraised value.
Your loan officer can give you more information about the appraisal process and how your home’s value affects your eligibility and possible loan amount. If you have questions about your home’s appraisal, ask your loan officer for details.
An appraisal is the best estimate of your home’s value and is required for the HECM loan. If you want to obtain other estimates on your own,you could: