www.timothyabbott.com

Testimonials

Below is a list of clients I have had the priviledge of working with...

When my wife and I wanted to refinance, we called Tim and he took care of all of the details over the phone in just a few minutes. He talked us through the entire process and kept in touch with us regularly through our closing. we were very pleased with our experience and will definitely use Tim again. Tim did a great job and was easy and friendly to work with.
-Tyler Thompson, Derry NH  Thompson.pdf

My experience with Tim Abbott and Patriot Funding was excellent. Tim made himself available to me at my convenience and was able to answer any and all questions that I had. He may buying my first home easy and painless, and took away some of that first time buyer pressure and stress.
-Joseph Maguire, Derry NH  Maguire.pdf

Tim Abbott was very professional and at the same time very pleasant and helpful. He seems to go out of his way to make things easier for us especially since we were busy people in our own business.
-Helen Kondilis, Newton NH  Kondilis.pdf

It took me six months to find the perfect home. Everything went smoothly until 6 days before the closing date. I started having problems with my mortgage company. I called Tim and one meeting and a few phone calls later things were back on track. Exactly one week after our first meeting I was moving into my new home.
-A Houlihan, Maine  Houlihan.pdf

We were pleased with the quick and effective service provided by Tim at Patriot Funding. We believe we received a very competitve rate on our new mortgage.
-Paul Bradley, Georgetown, MA  Bradley.pdf

Tim was very thorough and patient. He went "above and beyond the call of duty." His expertise is unlimited in his field. No question was insignificant, even if asked many, many times.
-Susan LaFlamme, Merrimac, MA  LaFlamme.pdf

Tim was always available, able to answer all of our questions clearly and help us through this sometimes confusing process. He was great!
-Jennifer Kyte, Amesbury, MA  Kyte.pdf

Tim was very helpful. Having gone through the home buying process for the first time, he told me everything to expect, what to be ready for, and kept his calm demeanor at times when things got hectic.
-Joe LeBlanc, Amesbury, MA  LeBlanc.pdf

Some financial people do not know how to explain the fine details in such a way that folks like us can understand. Tim is not one of those people. We understood every details and if we didn't he was pleased to explain again. He did a fantastic job!
-Karen and Chris May, Sanford, ME  May.pdf                     

Tim was fantastic from start to finish in securing financing for a recent second home purchase. Due to the nature of this property and location, financing and insurance was a challenge. Tim worked hard to overcome all barriers and made this transaction painless.
-Charles Byrnes, Newburyport, MA  Byrnes.pdf

Tim is by far the BEST Loan Officer I have dealt with. He is extremely responsive and helpful. I would highly recommend him
-Lisa Coe, Haverhill MA  Coe.pdf

Tim's highly professional and thorough approach to finding the best mortgage program for me. Tim never rushed, but always delivered on time whenever I needed information or service. His approach quickly gained my confidence. I will refer all of my friends and family to him.
-Robert Young, Haverhill MA  Young.pdf

I have worked with you in my business (I am a realtor) and for my personal and you are by far the most professional, pleasant mortgage officer I have ever dealt with. I was very happy to have you do my deal and as you know, I happily refer business to you regularly.
-Elizabeth Graves, Ipswich MA  Graves.pdf

Tim was polite, personable, courteous and very efficient. he explained out options thoroughly and did a fantastic job securing our loan. We would recommend him to anyone.
-Lowell Widmer, Amesbury MA 

Tim did what he said he would do when he said he would do it. There were never any surprises, he explained everything thoroughly. Tim made buying our new house much easier than it could have been. I would recommend Tim Abbott highly.
-Steven Cohen, North Andover MA  Cohen.pdf

Tim is a very affable young man. He makes you comfortable with the whole mortgage process. He addresses any questions or concerns promptly and directly. Tim is a pleasure to do business with.
-Fred and Mary Parent, Haverhill MA  Parent.pdf

What can you say about Tim Abbott. He made completing the mountian of paperwork as enjoyable as it could be. Tim is a fine professional in his field. We will always do business with Tim, he is great.
-Bill Mullen and Jeanne Smith, Amesbury MA  SmithMullen.pdf

Tim was extremely helpful. I felt assured that we were making all the right decision. His knowledge and experience put my wife and I at ease.
-Joe and Cheri Natalino, Nashua NH  Natalino.pdf

Tim was extremely helpful. He made the process of buying my first home very easy. Tim explained everything and was always available to answer any questions. Tim even travelled to us to fill out the application. I will definitely refer him to family and friends.
-Michele Potvin, Leominster MA  Potvin.pdf

Tim Abbott is a saint!! I was pre-approved for a mortgage through another company and when it came down to cruch time they tried to ge me to sign at a much higher rate. A week before my husband and I were dclosing on our house I came to Tim in tears. We weren't going to be able to swing the monthly payment they were offering us. Tim got everything taken care of and we signed with Patriot funding at a much lower rate. We were still able to move in at the end of the week. On October 25th, we will have been new homeowners for three months. None of this would have been possible without Tim. I can never thank you enough for everything you have done. You are a miracle worker and I will refer everyone I know to you.
-Kara and Troy Mudgett, Haverhill MA  Mudgett1.pdf  Mudgett2.pdf

This was the first time we bought a house and you could not have made it easier! Everyone said the procress of buying a house is one of the biggest headaches of a lifetime. With your help and knowledge you mde it a very pleasant experience. Thank you again!
-Ed and Pam Fitzgerald, Newton NH  Fitzgerald.pdf

We want to thank you for all of your help. We are enjoying our new place very much.
-Beth and Rusty Barnes, Haverhill MA 

You have made our financial part of this transition a breeze. Thank you for always having an answer to our million questions and showing us every optoin that was right for us. We will definitely keep in touch for our future needs.
-Steve and Kristin Lysik, Plymouth MA  Lysik.pdf

My wife and I were completely satisfied with our recent transaction with Tim Abbott. Tim spent the time up front to ensure that we'd close on time, without any surprises. I highly recomment Tim Abbott!!
-Rick and Jen Zaniboni, Newburyport MA  Zaniboni.pdf

Thank you for the exceptional and professional services you provided. Thank you also for your hard work, it is apreciated. We enjoyed working with you and hope we will have the opportunity to work together again soon.
-Johanna Webster  Webster.pdf

Tim and I truly appreciate all of your time, patience and accessibility throughout our home purchasing process. We feel so lucky to have had the pleasure of working with you in easing the transition from being renter to becoming homeowners. We will most certainly refer you to anyone we know in need of your services.
-Tim Kennedy and Kim Bell, Dover NH  KennedyBell.pdf 

Tim Abbott works to truly understand the individuals and their specific situations, and helps to determine programs that offer exceptional alternatives and options. No "one size fits all" approach here! Tim provides a true customer-centric service.
-Lea Cabeen and Mike Harrold, Amesbury MA  HarroldCabeen.pdf

Tim simplified our house purchase process by being on-site at our realtor's office and providing timely information. We were very pleased with the mortgage options presented to us.
-JB  JB.pdf

Tim took the nail-biting out of buying a new home. He was always professional and there with the answers.
-Richard Westhaver, Georgetown MA  Westhaver.pdf

Tim is a wonderful source of information and advice. He made sure we had all the information and knew all the options so we could make a wise and informed decision on a mortgage. He made everything simple and surprisingly stress-free.
-Ryan Breslin, Newton NH  Breslin.pdf

Tim was truly outstanding. I talked with him frequently and his demeanor was excellent. He is very much on top of his game and I recommend him to anyone.
-Dave Taber, Amesbury MA  Taber.pdf

Tim did an excellent job preparing everything and kept us informed with viable options for financing that met our needs and expectations. As a result, closing ran smoothly and quickly.
-Bruce Corb, Amesbury MA  Corb.pdf

Tim's customer service was tremendous. His ability to answer all my questions was great. His timely response, knowledge of the business and friendliness were the key drivers why I selected Patriot Funding. We were pleased with the quick and effective service provided by Tim. We believe we received a very competitive rate on our new mortgage.
-Joseph Carullo, Derry NH  Carullo.pdf

Shopping Around?

SHOPPING AROUND?

HERE’S THE INSIDE SCOOP ON HOW TO DO IT RIGHT!

First: make sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE ANSWERS…RUN…DON’T WALK… RUN…TO A LENDER THAT DOES!

1) What are mortgage interest rates based on? (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.)

2) What is the next Economic Report or event that could cause interest rate movement? (A professional lender will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, visit www.timothyabbott.com and request the weekly economic update).

3) When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates? (The answer may surprise you. When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give us a call).

4) Do you have access to live, real time, mortgage bond quotes? (If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!)

Be smart... Ask questions… Get answers

More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but we do this every single day. It’s your home and your future. It’s our profession and our passion. We're ready to work for your best interest.

SHOPPING... PART 2

Once you are satisfied that you are working with a top-quality professional mortgage advisor, here are the rules and secrets you must know to “shop” effectively.

First, IF IT SEEMS TO GOOD TO BE TRUE, IT PROBABLY IS. But you didn’t really need us to tell you that, did you? Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, better ask a few more questions and find the hook. Is there a prepayment penalty? If the rate seems incredible, are there extra fees? What is the length of the lock-in? If fees are discounted, is it built into a higher interest rate?

Second, YOU GET WHAT YOU PAY FOR. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands of the lowest bidder. Best case, expect very little advice, experience and personal service. Worst case, expect that you may not close at all. All too often, you don’t know until it’s too late that cheapest isn’t BEST. But if you want the cheapest quote – head on out to the Internet, and we wish you good luck. Just remember that if you’ve heard any horror stories from family members, friends or coworkers about missed closing dates, or big surprise changes at the last minute on interest rate or costs…these are often due to working with discount or internet lenders who may have a serious lack of experience. Most importantly, remember that the cheapest rate on the wrong strategy can cost you thousands more in the long run. This is the largest financial transaction most people will make in their lifetime. That being said – we are not the cheapest. Of course our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience that you deserve.

Third, MAKE CORRECT COMPARISONS. When looking at estimates, don’t simply look at the bottom line. You absolutely must compare lender fees to lender fees, as these are the only ones that the lender controls. And make sure lender fees are not “hidden” down amongst the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third party fees – they are often under-quoted up front by a lender to make their bottom line appear lower, since they know that many consumers are not educated to NOT simply look at the bottom line! APR? Easily manipulated as well, and worthless as a tool of comparison.

Fourth, UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND. This means that you can have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.

Fifth, UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY. This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis. For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates.

Again, our advice to you is to be smart. Ask questions. Get answers.

As you can imagine, we wouldn’t be encouraging you to shop around if we weren’t pretty confident that we feel that we can give you a great value and serve you the very best.

Please call us with any further questions you may have at this time – we are ready to work for your best interest!

Rates

Simply put, there are too many variables. Are you purchasing your first property? Is it a single family residence or is it a condo? Is it a second home, or perhaps an investment property? What type of credit history do you have? Does it make sense for you to pay points or no points? Each aspect represents a different piece of the puzzle, and all of the pieces are needed to give you the best rate. It does not help you if I give you one set of generic rates, as they may be too high or too low.

For further explaination, please see these articles from my blog.

Please contact me and I will be happy to learn about your situation in order to give you the best rate possible.

Pre-approval

Why Should I Be Pre-Approved?

Exactly how much of a home can I buy?

By getting pre-approval before you make an offer, you will be certain of the amount of the loan you will qualify for. 

Patriot Funding can provide you with full credit approval in advance, which will allow you to shop as a cash buyer. With written approval in your hand, you can make a more aggressive negotiation and this could save you thousands of dollars on your home purchase.

There are so many loan options How will I know which one is best for me?

When you are pre-approved by Patriot Funding, you will have access to thousands of loan programs. We will determine what programs you do qualify for, and narrow it down to the one that is right for your long-term goals.

What will my payments be?

The amount of your monthly payment depends on the specific loan program you choose. We can provide you with an easy-to-read spreadsheet that compares different loan programs so that you will feel comfortable about your monthly financial obligation before even making an offer on a home.

What is credit scoring and how does it work?

Credit scoring is an evaluation system used by lenders to help them determine whether or not they should lend you money. This system grades you based on 5 different factors, including your payment history, outstanding credit balances, credit history, the type of credit you have accumulated, and the number of inquiries on your credit record. Points are awarded for each factor, with a high score being favorable.

How much does it cost to be pre-approved?

Absolutely nothing! You have nothing to lose and everything to gain. We provide free consultation to all our clients at all times. Our goal is not only to help you find the best loan now, but also help you manage that financial responsibility in the future by reviewing your options on a regular basis.

How will pre-approval benefit me when I make an offer?

Full credit approval gives you buying power. It allows you to shop as a cash buyer; you can negotiate more aggressively and potentially save thousands of dollars. The seller will take your offer more seriously because they will know you already have approval from a lender.

We would like to make your home buying experience enjoyable!   
Full Credit Approval can save you up to 15% on the purchase price fo your home!  Call us today to set up an appointment for your credit approval.

Points

How do you "buy" a better rate?

Do you plan on keeping your loan for a while? Then it may make sense to "buy" a lower interest rate by paying one or more "points."

Even if you're unsure of how long you plan to keep your mortgage before you move or refinance, paying points now for a lower rate may make sense. For example, do you have a high-paying job now but you think you might change careers in the next few years? We can help you sort it out. It's part of our finding the right loan for your means and goals.

A point -- which equals one percent (1%) of the total loan amount -- is an up-front fee that lowers your monthly interest rate and total interest due over the life of the loan. So, a one point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can pay fractions of points, meaning there are a lot of points packages that can make a loan's terms more favorable if that's what's right for you.

There are a variety of rate and point combinations available. When you look at different loan programs, don't look just at the rate -- compare the whole package. Federal law requires lenders to publish their loans' Annual Percentage Rate, or A.P.R.. The A.P.R. is a tool used to compare different terms, offered rates, and points.

Why You Should Get a Home Inspection

Why you should get an Inspection?

Whether you are buying or selling a home, you should have a professional home inspection performed.

A home inspection will look at the systems that make up the building such as:

• Structural elements, foundation, framing etc
• Plumbing systems
• Roofing
• Electrical systems
• Cosmetic condition, paint, siding etc

If you are buying a home, you need to know exactly what you are getting. A home inspection, performed by a professional home inspector, will reveal any hidden problems with the home so that they may be addressed BEFORE the deal is closed. You should require an inspection at the time you make a formal offer. Make sure the contract has an inspection contingency. Then, hire your own inspector and pay close attention to the inspection report. If you aren't comfortable with what he finds, you should kill the deal.

Likewise, if you are selling a home, you want to know about such potential hidden problems before your house goes on the market. Almost all contracts include the condition that the contract is contingent upon completion of a satisfactory inspection. And most buyer's are going to insist that the inspection be a professional home inspection, usually by an inspector they hire. If the buyer's inspector finds a problem, it can cause the buyer to get cold feet and the deal can often fall through. At best, surprise problems uncovered by the buyer's inspector will cause delays in closing, and usually you will have to pay for repairs at the last minute, or take a lower price on your home.

It's better to pay for your own inspection before putting your home on the market. Find out about any hidden problems and correct them in advance. Otherwise, you can count on the buyer's inspector finding them, at the worst possible time.

Finding a Good Home Inspector: What You Should Ask?

You've found the house, your offer has been accepted, and funding is in place. But before you start packing, be sure you hire a professional home inspector to make sure your house doesn't have any major defects that could cost you down the road.

A home inspection typically includes an examination of heating and central air conditioning systems, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements. Inspections may also include appliances and outdoor plumbing.

Once the inspector examines the house, he or she will write up a report with findings. If there are any major problems, you'll need to negotiate with the seller to either lower the sale price of the home, or determine how the problem will be fixed.

When you make an offer it's wise to have a contingency clause based on the home inspection. In other words, if the inspector finds $10,000 worth of problems and the seller doesn't want to provide the fix, you can rescind your offer.

In fact, two in five resale houses will have at least one major defect that could cost you from a few hundred dollars to as much as $15,000 to repair, according to the 2000 HouseMaster Resale Home Deficiencies Study. Spending a few hundred dollars for a home inspection is well worth the peace of mind.

Tyson and Brown say the American Society of Home Inspectors is a good place to start. "Just because an inspector is an ASHI member doesn't guarantee that you'll get a good inspection, but it certainly increases the likelihood that you'll be working with a qualified professional," Brown and Tyson write.

All certified members have performed at least 250 inspections have passed two written proficiency exams. They must also adhere to standards of practice, continuing education requirements, and code of ethics.

The authors and the ASHI recommend you interview several inspectors before choosing one. Some of the questions you should ask include:

• What does the inspection cover? Make sure the inspection and the inspection report meet all applicable requirements and comply with the ASHI Standards of Practice.
• How long have you been in the profession and how many homes have you inspected? Again, ASHI Members are required to have completed at least 250 paid professional home inspections and passed two written exams that test the inspector's knowledge.
• Are you specifically experienced in residential inspection? The answer should be yes. If someone says they have specialized training in something like construction or engineering but not in residential inspection, you may want to move on to the next candidate.
• Does the inspector's company offer to do repairs or improvements based on the inspection? The answer should always be no. This is against the ASHI Code of Ethics because it might cause a conflict of interest.
• How long will the inspection take? The average for a single inspector is two to three hours for a typical single-family house; anything less may not be enough time to do a thorough inspection. Some inspection firms send a team of inspectors and the time frame may be shorter.
• How much will it cost? Costs vary quite a bid depending on the region, size of the house, scope of services and other factors. A typical range might be $300-500, but consider the value of the home inspection in terms of the investment being made.
• Does the inspector prepare a written report? Ask to see samples and determine whether you understand the report.
• Does the inspector encourage the client to attend the inspection? This is a valuable educational opportunity for you to learn about how things work around what could be your house, and the inspector may point out things that don't quite merit a mention in the report but which you should keep an eye on. An inspector's refusal to allow you to be present should raise a red flag.

Finally, once you've found an inspector you like, ask him for references, then follow up and contact those clients. Two key questions - whether they discovered any major defects after the close of escrow that the inspector missed, and whether they'd use the inspector again.

Glossary

A B C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z ACRE   Back to top 43,560 square feet. A measurement of area. ACTUAL AGE   Back to top The amount of time that has passed since a building or other structure was built. See also: EFFECTIVE AGE ADJUSTMENT DATE   Back to top The date the interest rate changes on an adjustable rate mortgage. ADJUSTABLE-RATE MORTGAGE (ARM)   Back to top A type of mortgage where the interest rate varies based on a particular index, normally the prime lending rate. AMORTIZATION   Back to top The repayment of a loan through regular periodic payment. AMORTIZATION SCHEDULE   Back to top The breakdown of individual payments throughout the life of an amortized loan, showing both principal contribution and debt service (interest) fees. AMORTIZATION TERM   Back to top The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years. ANNUAL PERCENTAGE RATE (APR)   Back to top The rate of annual interest charged on a loan. APPRAISAL   Back to top A ''defensible'' and carefully documented opinion of value. Most commonly derived using recent sales of comparable properties by a licensed, professional appraiser. APPRAISED VALUE   Back to top An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals. APPRAISER   Back to top An educated, certified professional with extensive knowledge of real estate markets, values and practices. The appraiser is often the only independent voice in any real estate transaction with no vested interest in the ultimate value or sales price of the property. ASSESSED VALUE   Back to top The value of a property according to jurisdictional tax assessment. ASSUMABLE MORTGAGE   Back to top A mortgage that can be taken over by the buyer when a home is sold. BALLOON MORTGAGE   Back to top A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment. BALLOON PAYMENT   Back to top The final large payment at the end of a balloon mortgage term. BIWEEKLY MORTGAGE   Back to top A mortgage where you make "half payments" every two weeks, rather than one payment per month. This results in making the equivalent of 13 monthly payments per year, rather than 12, significantly reducing the time it takes to pay off a thirty year mortgage. BRIDGE FINANCING   Back to top An interim loan made to facilitate the purchase of a new home before the buyer's current residence sells and its equity is available to fund the new purchase. BUY DOWN   Back to top Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage. CAP   Back to top Associated with Adjustable Rate Mortgages. A limit on how high monthly payments or how much interest rates may change within a certain time period or the life of the mortgage. CASH-OUT REFINANCE   Back to top Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash. CAVEAT EMPTOR   Back to top Literally translated: ''Let the buyer beware.'' A common business tenet whereby the buyer is responsible for verifying any and all claims by the seller of property. CERTIFICATE OF DEPOSIT INDEX   Back to top An index based on the interest rate of six month CD's. Used to set interest rates on some Adjustable Rate Mortgages. CERTIFICATE OF ELIGIBILITY   Back to top A document issued by the Veterans Administration that certifies eligibility for a VA loan. CERTIFICATE OF OCCUPANCY   Back to top Issued by an appropriate jurisdictional entity, this document certifies that a building complies with all building codes and is safe for use or habitation. CERTIFICATE OF TITLE   Back to top A document designating the legal owner of a parcel of real estate. Usually provided by a title or abstract company. CHAIN OF TITLE   Back to top The complete history of ownership of a piece of property. CLOSING   Back to top A torturous process designed to induce cramping in a home buyer's hands by requiring signature on countless pieces of documentation that nobody has ever read. Or, the process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale (CLOSING COSTS). CLOSING COSTS   Back to top All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal. CLOSING STATEMENT   Back to top The document detailing the final financial arrangement between a buyer and seller and the costs paid by each (HUD-1 SETTLEMENT STATEMENT). CO-BORROWER   Back to top A second person sharing obligation on the loan and title on the property. COLLATERAL   Back to top An asset which is placed at risk to secure the repayment of a loan. COMMON AREA ASSESSMENTS   Back to top Fees which are charged to the tenets or owners of properties to cover the costs of maintaining areas shared with other tenets or owners. Commonly found in condominium, PUD or office spaces. COMPARABLES   Back to top An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property who's value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property. CONCESSIONS   Back to top Additional value granted by a buyer or seller to entice another party to complete a deal. CONDOMINIUM   Back to top A development where individual units are owned, but common areas and amenities are shared equally by all owners. CONDOMINIUM CONVERSION   Back to top Commonly, the conversion of a rental property such as an apartment complex into a CONDOMINIUM-style complex where each unit is owned rather than leased. CONSTRUCTION LOAN   Back to top A loan made to a builder or home owner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed. CONTINGENCY   Back to top Something that must occur before something else happens. Often used in real estate sales when a buyer must sell a current home before purchasing a new one. Or, when a buyer makes an offer the requires a complete home inspection before it becomes official. CONVENTIONAL MORTGAGE   Back to top A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.). CONVERTIBLE ARM   Back to top A mortgage that begins as and adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe. COOPERATIVE (CO-OP)   Back to top A form of ownership where each resident of a multiunit property owns a share in a cooperative corporation that owns the building. With each resident having rights to a specific unit within the building. COST OF FUNDS INDEX (COFI)   Back to top An index of financial institutions costs used to set interest rates for some Adjustable Rate Mortgages. CREDIT REPORT   Back to top A detailed report of an individuals credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals. DEED   Back to top A document indicating the ownership of a property. DEED-IN-LIEU (OF FORECLOSURE)   Back to top A document given by a borrower to a lender, transferring title of the property. Often used to avoid credit-damaging foreclosure procedures. DEPOSIT   Back to top Cash given along with an offer to purchase property, Also called EARNEST MONEY. DEPRECIATION   Back to top The natural decline in property value due to market forces or depletion of resources. DISCOUNT POINTS   Back to top Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount. DUE-ON-SALE PROVISION   Back to top A clause in a mortgage giving the lender the right to demand payment of the full balance when the borrower sells the property. DOWN PAYMENT   Back to top An amount paid in cash for a property, with the intent to mortgage the remaining amount due. EARNEST MONEY DEPOSIT   Back to top A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer. EASEMENT   Back to top The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines. ECONOMIC DEPRECIATION   Back to top The decline in property value caused by external forces, such as neighborhood blight or adverse development. EFFECTIVE AGE   Back to top The subjective, estimated age of a property based on its condition, rather than the actual time since it was built. Excessive wear and tear can cause a property's effective age to be greater than its actual age. ENCUMBRANCE   Back to top A claim against a property. Examples are mortgages, liens and easements. EQUAL CREDIT OPPORTUNITY ACT (ECOA)   Back to top U.S. federal law requiring that lenders afford people equal chance of getting credit without discrimination based on race, religion, age, sex etc EQUITY   Back to top The difference between the fair market value of a property and that amount an owner owes on any mortgages or loans secured by the property. ESCROW   Back to top An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property. ESCROW ACCOUNT   Back to top An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that goes into the escrow account each month. ESCROW ANALYSIS   Back to top An analysis performed by the lender usually once each year to see that the amount of money going into the escrow account each month is correct for the forecasted expenses. ESCROW DISBURSEMENTS   Back to top The payout of funds from an escrow account to pay property expenses such as taxes and insurance. EXCLUSIVE LISTING   Back to top An agreement between the owner of a property and a real estate agent giving the agent exclusive right to sell the property. FAIR CREDIT REPORTING ACT   Back to top A federal law regulating the way credit agencies disclose consumer credit reports and the remedies available to consumers for disputing and correcting mistakes on their credit history. FAIR MARKET VALUE   Back to top The price at which two unrelated parties, under no duress, are willing to transact business. FANNIE MAE   Back to top A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation's largest source of financing for home mortgages. FEDERAL HOUSING ADMINISTRATION (FHA)   Back to top A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930's to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders. FEE SIMPLE   Back to top A complete, unencumbered ownership right in a piece of property. FHA MORTGAGE   Back to top A mortgage that is insured by the Federal Housing Administration (FHA). FIRST MORTGAGE   Back to top The primary loan or mortgage secured by a piece of property. FIXED-RATE MORTGAGE (FRM)   Back to top A mortgage which has a fixed rate of interest over the life of the loan. OOD INSURANCE   Back to top Supplemental insurance which covers a home owner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones. FUNCTIONAL OBSOLESCENCE   Back to top A decrease in the value of property due to a feature or lack thereof which renders the property undesirable. Functional obsolescence can also occur when the surrounding area changes, rendering the property unusable for its originally intended purpose. GINNIE MAE   Back to top A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers. GOVERNMENT MORTGAGE   Back to top Any mortgage insured by a government agency, such as the FHA or VA. HAZARD INSURANCE   Back to top Insurance covering damage to a property caused by hazards such as fire, wind and accident. HIGHEST AND BEST USE   Back to top The most profitable and likely use of a property. Selected from reasonably probable and legal alternative uses, which are found to be physically possible, appropriately supported and financially feasible to result in the highest possible land value. HOME EQUITY CONVERSION MORTGAGE (HECM)   Back to top Also known as a reverse annuity mortgage. It allows home owners (usually older) to convert equity in the home into cash. Normally paid by the lender in monthly payments. HECM's typically don't have to be repaid until the borrower is no longer occupying the home. HOME EQUITY LINE OF CREDIT   Back to top A type of mortgage loan that allows the borrower to draw cash against the equity in his home. HOME INSPECTION   Back to top A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value. HOME INSPECTOR   Back to top A person who performs professional home inspections. Usually, with an extensive knowledge of house construction methods, common house problems, how to identify those problems and how to correct them. HOMEOWNER'S ASSOCIATION   Back to top An organization of home owners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants. HOMEOWNER'S INSURANCE   Back to top A policy which covers a home owner for any loss of property due to accident, intrusion or hazard. HOMEOWNER'S WARRANTY   Back to top An insurance policy covering the repair of systems and appliances within the home for the coverage period. HUD-1 STATEMENT   Back to top A standardized, itemized list, published by the U.S. Department of Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected with a particular property purchase. IMPROVED LAND   Back to top Any parcel of land which has been changed from its natural state through the creation of roads, buildings or other structures. INTEREST RATE   Back to top A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds. INVESTMENT PROPERTY   Back to top Any piece of property that is expected to generate a financial return. This may come as the result of periodic rents or through appreciation of the property value over time. JOINT TENANCY   Back to top A situation where two or more parties own a piece of property together. Each of the owners has an equal share, and may not dispose of or alter that share without the consent of the other owners. JUMBO LOAN   Back to top A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans. LEASEHOLD ESTATE   Back to top A type of property ''ownership'' where the buyer actually has a long-term lease on the property. LEASE OPTION   Back to top A lease agreement that gives the tenant an option to buy the property. Usually, a portion of the regular monthly rent payment will be applied towards the down payment. LEGAL DESCRIPTION   Back to top The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection. LIABILITIES    Back to top A person's outstanding debt obligations. LIEN   Back to top Any claim against a piece of property resulting from a debt or other obligation. LIFE CAP   Back to top A limit on how far the interest rate can move for an Adjustable Rate Mortgage. LIKE-KIND PROPERTY   Back to top Any property which is substantially similar to another property. LINE OF CREDIT   Back to top An extension of credit for a certain amount for a specific amount of time. To be used by the borrower at his discretion. LOAN SERVICING   Back to top The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to. LOAN-TO-VALUE RATIO (LTV)   Back to top The comparison of the amount owed on a mortgaged property to its fair market value. LOCK-IN    Back to top An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time. LOCK-IN PERIOD   Back to top The amount of time the lender has guaranteed an interest rate to a borrower. MARGIN   Back to top The difference between the interest rate and the index on an adjustable rate mortgage. MATURITY   Back to top The date on which the principal balance of a financial instrument becomes due and payable. MERGED CREDIT REPORT   Back to top A credit report derived from data obtained from multiple credit agencies. MORTGAGE   Back to top A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral. MORTGAGE INSURANCE   Back to top A policy that fulfills that obligations of a mortgage when the policy holder defaults or is no longer able to make payments. MORTGAGE INSURANCE PREMIUM (MIP)   Back to top An fee that is often included in mortgage payments that pays for mortgage insurance coverage. MORTGAGE LIFE INSURANCE   Back to top A policy that fulfills the obligations of a mortgage when the policy holder dies. NEGATIVE AMORTIZATION   Back to top When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest. NO-COST LOAN   Back to top Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it. NO-POINT LOAN   Back to top A loan with no "points". The interest rate on such a loan will be higher than a loan with points paid. Also sometimes refers to a refinance loan where closing costs are included in the loan. NOTE   Back to top A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. NOTE RATE   Back to top The interest rate stated on a mortgage note. ORIGINATION FEE   Back to top Refers to the total number of points paid by a borrower at closing. OWNER FINANCING   Back to top A transaction where the property owner provides all or part of the financing. OWNER OCCUPIED   Back to top The state of property wherein the owner occupies at least some portion of the property. PERIODIC PAYMENT CAP   Back to top The limit on how much regular monthly payments on an Adjustable Rate Mortgage can change during one adjustment period. PERIODIC RATE CAP   Back to top The limit on how much the interest rate on an Adjustable Rate Mortgage can change during any one adjustment period. PLANNED UNIT DEVELOPMENT (PUD)   Back to top A coordinated, real estate development where common areas are shared and maintained by an owner's association or other entity. PLAT   Back to top A plan or chart of a piece of land which lays out existing or planned streets, lots or other improvements. POINT   Back to top A percentage of a mortgage amount (one point = 1 percent). PRE-APPROVAL   Back to top The process of applying for a mortgage loan and becoming conditionally approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers. PREPAYMENT   Back to top Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized. PREPAYMENT PENALTY   Back to top A fee that may be charged to a borrower who pays off a loan before it is due. PRE-QUALIFICATION   Back to top Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan. PRIME RATE   Back to top The interest rate that banks and other lending institutions charge other banks or preferred customers. PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)   Back to top The most common constituents of a monthly mortgage payment. PRIVATE MORTGAGE INSURANCE (PMI)   Back to top A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%. PURCHASE AGREEMENT   Back to top A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold. QUALIFYING RATIOS   Back to top Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrower's monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income. QUITCLAIM DEED   Back to top A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear. RATE LOCK   Back to top A guarantee from a lender of a specific interest rate for a period of time. RAW LAND   Back to top Any land which has not been developed. REAL ESTATE AGENT   Back to top A licensed professional who facilitates the buying and selling of real estate. REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)   Back to top A federal law requiring lenders to give full disclosure of closing costs to borrowers. REALTOR   Back to top A real estate agent or broker who is a member of the National Association of Realtors. REFINANCE TRANSACTION   Back to top A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash. REVOLVING DEBT   Back to top A type of credit that allows the borrower/customer to make charges against a predetermined line of credit. The customer then pays monthly installments on the amount borrowed, plus interest. SALE PRICE   Back to top The actual price a property sells for, exclusive of any special financing concessions. SALES COMPARISON APPROACH   Back to top An appraisal practice which estimates the value of a property by comparing it to comparable properties which have sold recently. SECOND MORTGAGE   Back to top A loan secured by the equity in a home, when a primary mortgage already exists. SECONDARY MORTGAGE MARKET   Back to top An economic marketplace where mortgage bankers buy and sell existing mortgages. SERVICER   Back to top A financial institution which collects mortgage payments from borrowers and applies the appropriate portions to principal, interest and any escrow accounts. SURVEY   Back to top A specific map of a piece of property which includes the legal boundaries and any improvements or features of the land. Surveys also depict any rights-of-way, encroachments or easements. TENANCY IN COMMON   Back to top A form of holding title, whereby there are two or more people on title to a property, ownership does not pass on to the others upon the death of one individual. TITLE INSURANCE   Back to top A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise. TITLE SEARCH   Back to top The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist. TRANSFER OF TAX   Back to top Taxes payable when title passes from one owner to another. TRUTH IN LENDING   Back to top A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage. UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP)   Back to top Developed in 1986 by the Ad Hoc Committee on Uniform Standards and copyrighted in 1987 by The Appraisal Foundation, USPAP forms the guidelines followed by every licensed and certified real estate appraiser in the United States. The purpose of these Standards is to establish requirements for professional appraisal practice, which includes appraisal, appraisal review, and appraisal consulting. The intent of these Standards is to promote and maintain a high level of public trust in professional appraisal practice. VA MORTGAGE   Back to top A mortgage that is guaranteed by the Department of Veterans Affairs (VA). VARIANCE   Back to top An exception to municipal zoning regulations granted for a specific time period to allow for non-conforming use of the land. VETERANS AFFAIRS, DEPARTMENT OF (VA)   Back to top The successor to the Veteran's Administration, this government agency is responsible for ensuring the rights and welfare of our nation's veterans and their dependents. Among other duties, the VA insures home loans made to veterans. WEAR AND TEAR   Back to top A term used to indicate the normal damage inflicted on a property through every-day use. ZONE   Back to top A specific area within a municipality or other jurisdiction which conforms to certain guidelines regarding the use of property in the zone. Typical zones include single-family, multi-family, industrial, commercial and mixed-use.

The Truth About APR

Look Beyond APR in Mortgage Hunt...The Truth About APR

The "annual percentage rate" (APR) listed with any mortgage generally causes more confusion than its worth for most homebuyers.  Making matters worse, most mortgage professionals dont really understand it.  An APR calculation is required on mortgage offers to help people make sense of all the figures flying around.  The ultimate goal is accurate comparative shopping.  Unfortunately, some lenders can and will manipulate APR; and the assumptions used generally make APR estimates unrealistic. 

APR is at best a theoretical statistic.  Your mortgage carries a stated interest rate.  But it actually costs more, when you account for points paid up front and closing costs imposed by the lender.  APR tries to take all this into account.  Unfortunately, it usually does little more than confuse homebuyers. In fact, the calculations associated with APR frequently scare homebuyers.

Under APR math, you take the loan amount, which is easy for anyone to understand, and turn it into the "amount financed."  Lets look at an example: If you put 10 percent down on a $200,000 home, the loan amount is $180,000.  Lets say you pay $5,000 in points and closing costs.  That means the amount financed is $175,000.  Homebuyers panic when they see the $175,000, thinking that they suddenly have to come up with another $5,000 at the last minute to pay the seller.  But in fact, that figure comes up merely to calculate APR and has no real bearing on the transaction.

Another source of confusion and misleading comparisons stems from what is known as "interim interest."  For various reasons, mortgage payments are almost always timed with calendar months.  So if you close sometime during the month, then you have to pay that little bit of extra interest until the first payment is due. Interim interest can alter the APR calculation by several basis points, but that does not really mean one mortgage is better than another.  It merely means that one closing date is further away from the end of the month than another.  Lenders can play games with interim interest to get lower hypothetical APRs on advertised loans.  Laws regarding APR actually allow some wiggle room for this sort of thing.  A lender can be off by as much as 1/8 of a percentage point.  Unfortunately, in a competitive mortgage market that can mean the difference between winning and losing a customer.

Homebuyers generally arent aware of the faulty assumptions that go into APR calculations.  These assumptions can lead to people taking on the wrong kind of mortgage.

APR math relies on two very bad assumptions:

• APR assumes zero inflation. In other words, $1 today equals $130 years from now.
• APR assumes the homebuyer will never move, prepay, or refinance.

In fact, a typical family stays in the same house about nine years, and refinances once. That brings the average mortgage duration down to less than five years.

Most APR assumptions are grossly unrealistic.  Adjustable Rate APR calculations are based on even more assumptions, making them even less meaningful.

So what do you do? Take a look at the APR, and then forget about it?  Dont pay points, unless you plan to stay in the house for at least 10 years and wont refinance?  Chances are good that you will move before 10 years is up, or you will end up refinancing!

It is much easier to compare different offers if they dont include points.  You should focus on the type and amount of the mortgage, and on the quality of service of the lender.

The Truth About Appraisals

The Truth About Appraisals

Many consumers are often frustrated when they have a home appraised. Often, they feel that their home is worth more than the appraised value. In many cases they are right!  This does not change the fact that real estate appraisers must adhere to very specific rules and guidelines that are dictated by the lender.  A few years ago, lenders added a requirement to appraisal guidelines, stating that the intended use of the appraisal must be indicated in each appraisal report.  This is simply because appraisals can be used for different purposes, each having different values and rules.

In determining value for the purpose of a finance transaction, appraisers must follow guidelines set by the lenders, which in many cases results in a slightly more conservative estimated value.  Everything that an appraiser adjusts for positive or negative must be bracketed and supported by the comparable sales.  For example, if a home is purchased for $100,000 and the owners choose to add a pool at a cost of $30,000, the value of the home does not automatically increase to $130,000.  The appraiser must determine through a paired sales analysis what the market will support for a pool.  If, in the same marketplace, a comparable home without a pool sold for $100,000 and a comparable home with a pool sold for $115,000, then the appraiser can only support a $15,000 adjustment.  This is the case with any features that an appraiser can adjust for, not just a swimming pool.  There is no set figure for any feature like a view, pool, spa, square footage, bathroom upgrades, etcit must always be bracketed.

On homes two to three years old or newer, upgrades typically can be recovered in an appraised value at actual cost, as the only way for new homes to have these upgrades is to pay actual cost.  This is typically reflected in higher selling prices.  However, when dealing with older homes, upgrades usually do not recapture their full cost for the same reasons indicated in our previous example dealing with the addition of a pool. Here is an extreme example: If a 40 year old home in average-to-good condition is purchased for $100,000 and the buyers choose to tear down the existing dwelling and build a new house at a cost of $100,000, the value is not automatically $200,000.  The reason for this is because the original structure had value. Unless the home is in very poor condition, the sales price reflects value for the subject improvements.  Therefore in this case, if the value of the original dwelling was $50,000 with the remaining $50,000 being land value, the new estimated value would be closer to $150,000, meaning that when the existing structure was torn down, that constituted a loss of $50,000 in value.  The same applies to a kitchen or bathroom remodel, in that the original kitchen or bathroom had value in its original condition.  This is why the cost of upgrades or remodeling of older homes can rarely be fully recaptured.  Again, there is no set figure only what the market will support for an upgrade or remodeled home vs. one that is not.

State and lender guidelines require appraisers to base value on closed and verified comparable sales. Although property values are increasing in most areas of the country, typically lenders will not allow time adjustments to be made on comparables that sold within the past 6 months. In regards to pending sales and listings used as comparables in a report, some lenders actually require appraisers to use both a pending sale and a listing.  This is not for the purpose of supporting a higher value in the lenders eyes; it is only to show that current market activities still support the closed comparable sales used.  When using pending sales or listings as comparables, lenders want to see an adjustment made for possible negotiations. (Yes, even though many homes over the past couple of years have sold above their list prices!)  Typical adjustments are usually between 5% and 10% off of the list price.  This guideline is a safeguard to prevent appraisers from appraising too high.  Furthermore, guidelines also indicate that appraisers can only base their opinion of value on sales that have closed escrow, and the pending sales and listings can only be used to support the closed sales.

If the appraisal were completed for a reason other than a mortgage finance transaction such as to determine a reasonable list price, you would likely see a higher estimated value.  As in this case, listing and pending sales would be the primary support for the value estimate.  When property values in a given marketplace are in the process of a drastic increase, this allows an appraiser to value property in real time based upon current pending sales or listings rather than sales that, although they may have closed within the past three months, have actually gone into Escrow four to six months prior.

It is also for this reason that, when appraising a home that has just sold within the past three or four months, a lender will not accept an appraisal at a significantly higher value than the previous purchase price based upon the passage of time alone, unless documentation can be provided that indicates the property sold below market value at the time it was originally purchased.  The only way to show an increase in value is to provide documentation that supports upgrades or remodeling completed by the current owners since the last sale transaction took place.  For example, if a buyer purchases a home in November of 2002 for $600,000 and the new owners have added $55,000 in upgrades, given the fact that it is a new home, the appraiser will likely be able to get full value for the $55,000 in upgrades. If the appraisal is documented properly, the appraisal on the home is likely to be $655,000. 

Although there is nothing in writing, appraisers are typically given 5% margin of error by lenders.  Any more than that and the value will most definitely be cut by one of the lenders appraisal review staff personnel. Therefore, an appraiser can fudge a couple of percent. While the reviewer will know when an appraiser is pushing its value, if it is within that 5% range, they will most often let it slide.  If an appraiser pushes beyond the 5%, lets say to 6%, 7% or 8% above and beyond what it is truly worth based upon comparable sales, the reviewer in charge of the file will take it all away and cut the value by the full 7%.  Keep in mind that every single lender in todays mortgage marketplace has a review department.  Therefore, given the example just mentioned, it would not be in the appraisers or the clients best interest to push the value too much.  It could end up exposing the property evaluation to a severe appraisal review!