Last updated: October 5, 2026
Before a lender approves your mortgage, it wants independent confirmation that the home is worth what you are paying. That is the job of the appraisal. Understanding how it works helps you prepare, and know your options if the value comes in low.
What an appraisal is
An appraisal is a licensed or certified appraiser’s opinion of a home’s market value. The lender orders it, usually after your offer is accepted, and you typically pay for it as part of your closing costs. Appraisers must be independent; lenders and agents are not allowed to pressure them toward a number.
How appraisers determine value
- Comparable sales: recent sales of similar nearby homes, adjusted for differences in size, condition, features and location.
- Property inspection: size, layout, condition, updates and any obvious issues.
- Market conditions: whether prices in the area are rising, stable or falling.
Some loans may use an appraisal waiver or alternative valuation when the lender’s automated systems have enough data. FHA, VA and USDA loans also check minimum property standards.
Why the appraisal matters for your loan
Lenders calculate your loan-to-value ratio using the lower of the purchase price or the appraised value. Suppose you agree to pay $400,000 and plan to put 10% down, but the home appraises at $380,000. The lender will lend 90% of $380,000, or $342,000, instead of $360,000. To keep the same price, you would need $58,000 down instead of $40,000.
A low appraisal can also affect PMI and, on a refinance, how much you can borrow; see cash-out refinance.
Options if the appraisal is low
- Renegotiate the price with the seller, using the appraisal as evidence.
- Cover the gap in cash, if you can and still want the home.
- Request a reconsideration of value through your lender if you believe the appraisal contains errors or missed better comparable sales.
- Walk away if your contract includes an appraisal contingency, usually keeping your earnest money.
Your right to a copy
Under federal rules, your lender must give you a copy of the appraisal and other written valuations promptly, and no later than three business days before closing. Review it for factual errors such as wrong square footage or missing features.
Tips for a smoother appraisal
- On a refinance, make the home easy to access and provide a list of updates with dates and costs.
- On a purchase, ask your agent for recent comparable sales before you make an offer.
- Keep your appraisal contingency unless you could cover a gap in cash.
Appraisal is one of the final steps before underwriting approval; see pre-approval vs. pre-qualification and rate locks for the rest of the timeline.
Frequently asked questions
What happens if the appraisal comes in low?
Your lender bases the loan on the lower of the price or appraised value. You can renegotiate the price, pay the difference in cash, challenge the appraisal with a reconsideration of value, or cancel if your contract has an appraisal contingency.
Can I get a copy of my appraisal?
Yes. Lenders must give you a copy of appraisals and written valuations promptly after they are completed, or at least three business days before closing.
How is a home appraisal different from an inspection?
An appraisal estimates market value for the lender. A home inspection checks the home’s condition for you. They serve different purposes and you usually want both.
Who pays for the appraisal?
The borrower usually pays, either upfront or as part of closing costs. The lender orders it from an independent appraiser.
Sources: CFPB: What is an appraisal?; CFPB: Buying a House. Example calculations by ToolStackIA.
This article is for educational purposes only and is not financial advice. Loan programs, rates and rules change; confirm details with your lender or a HUD-approved housing counselor.