Financing in San Jose>Question Details

Damian, Home Buyer in San Jose, CA

If appraisal is 10% more than the purchase price, is that the same as putting 10%

Asked by Damian, San Jose, CA Fri Aug 8, 2008

more cash down?

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Sorry, it doesn't work that way. As a general rule, the "value" for mortgage purposes is the *lower* of the purchase price or the appraised value. The silver lining is that your 10% down payment is also based on the lower of the two, so it would be smaller. If the down payment is an issue for you, consider other types of mortgages that do not require 10% down. A 10% down payment means 90% financing, which requires private mortgage insurance (PMI) if the mortgage is conventional. If you're going to have PMI, you might as well get a government loan if you can qualify. With an FHA mortgage, you pay FHA mortgage insurance (generally cheaper than PMI) - and your down payment can be less than 3%.
1 vote Thank Flag Link Sun Aug 24, 2008
Congratulations on a savvy purchase! As the others have mentioned it in not considered as cash down. Here is the good news though. If you placed 10% down and the appraisal came in 10% higher I would ask your mortgage broker or bank if you can avoid Mortgage Insurance. Good luck!
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1 vote Thank Flag Link Fri Aug 8, 2008
No. The 10% down is based off of the purchase price, not the appraised value. The only program that works differently is the USDA Rural Housing program.
0 votes Thank Flag Link Wed Jan 14, 2009
Short answer is are getting a good buy on the home, but you still need to put the 10% down.
0 votes Thank Flag Link Wed Jan 14, 2009
No, however your loan to value is immediatly 10% more than before after you close.

ie: if you put 20% down on a house that appraised for 10% more than the price, you would have 30% equity in the home after closing instead of 20%. A good position to be in.
0 votes Thank Flag Link Sat Aug 30, 2008
In today's market it is rare for an appraisal to be more than the asking price unless it is a foreclosure or short sale. Typically the additional 10% is just equity, but I would ask to see the comps. and formula that the appraiser used to make sure that it is a good appraisal. Good luck! Jack Vance
0 votes Thank Flag Link Fri Aug 8, 2008
In most cases no, it gives you 10% more equity but does not count as your down payment. The only variable is if you choose a program that allows you to purchase based on appraised value versus purchase price, ask your lender however these are mostly offered on rehab or construction loans.
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0 votes Thank Flag Link Fri Aug 8, 2008
Not typically,but it does depend on what loan program your lender has you in. In most cases though, it doesn't work like that. Obviously your lender is the only one who can answer this question. Good Luck.
0 votes Thank Flag Link Fri Aug 8, 2008
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