The housing market is heating up. As more people work from home, they're looking to transition to other locations. Home sales are projected to stay around 6 million or so for the next few years. This news is excellent for anyone looking to sell their home, as it means they'll have buyers looking for a place to live. If you plan to move in the next few years, now is the time to brush up on terminology and all you need to know.

Why You Must Get an Appraisal

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Home appraisals determine just how much your land or house is worth. The person who conducts the appraisal must be a professional without bias. A mortgage lender – the entity that offers you a home loan – will help you find an appraiser that will work with you and make sure you're paying the right price for a home.

Aim to work with a lender that has its own appraisers. Those who outsource appraisers have no communication with them, which can lead to a faulty or too-conservative appraisal, to your detriment.

Your appraisal is key to buying, refinancing, or selling any property. Appraisals help you ensure you're not underselling a property or that you're buying something at a fair rate that's reflected in the quality of the purchase. An appraisal may seem like an extra expense, but it's crucial to ensure everything in the transaction is fair – so in the end, it protects you.

What Is Loan-to-Value?

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Loan-to-value is a ratio that compares how much your mortgage payments are with the appraised value of your property. If you have a higher down payment, you'll have a lower ratio. Most people choose to put around 20% of the total cost of a home down upfront, which means their loan-to-value ratio would be 80%, assuming they get a loan for the rest of the money to purchase a property.

Mortgage lenders might use this ratio when deciding whether to lend to you.  Therefore, having a lower loan-to-value ratio could work in your favor when you want to buy or build your dream home.

Just be warned that the lender may cover less of the cost than you were expecting if the appraisal changes drastically. You may have to pay a bit more upfront than you initially expected. As long as you remain somewhere under 97%, you should be able to find a lender to work with you.

How It All Comes Together

Both appraisals and loan-to-value ratios are essential parts of buying and selling a home. For first-time homebuyers, they may seem a bit overwhelming and tough to understand. Working with the right person can help dispel any myths or fears in your mind.

Always work with a trusted professional who has proven their worth. Lenders will see the value in your home, or you as a person, and cooperate with you to find the best deal. Never skip an appraisal – it could work out in your favor.

The housing market has several moving parts that work together or parallel to one another. If you're new to the process, it might take a while before you understand all of it. Having the right team of people lead you to the result you want is essential. With your dream team, you can accomplish just about anything.