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Home Appraisals: Why They Matter & How They Impact Your Loan

So, your offer has been accepted, and you're getting closer to closing—but now your lender says they need an appraisal.

What does that mean for you? A home appraisal is one of the most important steps in the home-buying process, and if the numbers don’t match up, it can completely change your loan approval.

In this post, we’ll cover:

  • What a home appraisal is and why it matters
  • How appraisals impact your mortgage
  • What to do if the appraisal comes in too low

Step 1: What Is a Home Appraisal?

A home appraisal is when a licensed professional evaluates the value of a property. Lenders require appraisals to make sure the home is worth the amount they’re lending you.

Why? Because banks don’t want to give you a loan for more than the home is worth. If the borrower defaults, the lender wants to be sure they can sell the property and get their money back.

The appraiser looks at:

  • The home’s size, condition, and features
  • Recent sales of similar homes in the area
  • Market trends and neighborhood value

At the end of the process, they issue an appraisal report stating the home’s value.

Step 2: How the Appraisal Affects Your Loan

Your lender will only approve a loan based on the appraised value—not the price you agreed to pay.

Example:

  • You agree to buy a home for $350,000
  • The appraisal comes back at $330,000
  • The lender will only loan you $330,000, meaning you now have a $20,000 gap to cover.

If this happens, you have a few options:

  1. Negotiate with the seller – Ask them to lower the price to match the appraisal.
  2. Cover the difference in cash – If you have extra funds, you can pay the gap out of pocket.
  3. Challenge the appraisal – If you think there was a mistake, you can request a second opinion.
  4. Walk away – If you have an appraisal contingency, you can back out of the deal.

Pro Tip: Appraisals can sometimes be subject to repairs. If the appraiser finds safety issues—like a damaged roof or faulty electrical—the lender may require repairs before approving the loan.

Step 3: How to Prepare for the Appraisal Process

If you’re a buyer, the best thing you can do is work with a good agent who understands the local market and doesn’t overpay for a home.

If you’re a seller, you can:

  • Make small upgrades to increase the home’s value (fresh paint, landscaping, deep cleaning).
  • Provide comps (recent sales of similar homes) to help justify your asking price.
  • Ensure all major repairs are completed before the appraiser arrives.

Final Thoughts: Don’t Let an Appraisal Surprise You

  • An appraisal determines how much your lender will loan you—so it matters!
  • If the appraisal comes in lower than the purchase price, you’ll need to negotiate or cover the gap.
  • If you’re selling, preparing your home can help boost its appraised value.

An appraisal can make or break a deal, but when you know how the process works, you can navigate it with confidence.

Watch the Full Conversation

Want to learn more about how appraisals impact your home purchase? Watch this part of the discussion here:

Video Timestamp: 45:30 - 52:10

In Part 8, we’ll dive into the final walk-through—what it is, why it matters, and what to check before closing. 

#Realtor #RealEstateAgent #FirstTimeHomeBuyer #InvestmentProperty

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