Appraisal vs. Home Inspection: What’s the Difference?
If you’re planning to buy a home, you’ve probably heard the terms appraisal and home inspection—but did you know they serve completely different purposes? Understanding the difference between the two can help you feel more confident as you navigate the homebuying process. Plus, in some cases, you may even qualify for an appraisal waiver, saving you time and money. Let’s go over the differences and then talk about those waivers!
What is a Home Appraisal?
An appraisal is an assessment of a home’s market value, conducted by a licensed appraiser. If you’re using a mortgage to buy your home, your lender will require an appraisal to make sure the home is worth the amount you’re borrowing. The appraiser typically looks at things like the home’s size and condition, comparable home sales in the area, and any market trends that could contribute to the value of the home.
The goal of an appraisal is to protect both you and the lender by ensuring the home’s price matches its true market value. Don’t be afraid of appraisals! You want to know you’re getting your money’s worth as well in terms of how much the home you’re buying is actually worth.
The appraiser may call out health and safety items and ask an inspector to state if they are an issue. If you’ve already had a home inspection done, that is very helpful and that inspector can weigh in.
How Does a Home Inspection Differ?
A home inspection is a detailed examination of the home’s physical condition by a professional inspector. It’s different from an appraisal because it’s not going to be “required” by a lender (although–we do encourage it). The inspection gives you important insights into potential repairs before you commit to buying. The inspector checks things like:
- Structural integrity (roof, foundation, walls)
- Plumbing, electrical, and HVAC systems
- Safety concerns, such as leaks or faulty wiring
The goal of a home inspection is to help you understand the condition of the home before you purchase it. You are allowed to have your realtor write a contingency into your offer that the property must pass a home inspection prior to closing. That way any items you might want to have repaired prior to closing can be negotiated.
Can You Skip the Appraisal? You Might Qualify for an Appraisal Waiver!
In some cases, buyers with Conventional loans may qualify for an appraisal waiver, meaning we won’t require an appraisal at all! You may be eligible for an appraisal waiver if:
- You have strong credit and a significant down payment
- The home’s value can be determined using recent market data
- Your loan meets Fannie Mae or Freddie Mac’s automated approval requirements
Not all loans or properties qualify for a waiver, but as your mortgage lender, we’ll help determine if it’s an option for you. Remember, we are always looking out for your best interest as a home buyer, so even if you aren’t eligible for an appraisal waiver, it’s probably in your best interest to know the outcome of the appraisal as well!
Final Thoughts
While an appraisal and a home inspection may seem similar, they serve different purposes—one protects your loan, and the other protects your investment. And if you qualify for an appraisal waiver, you may be able to skip that step altogether!
Buying a home is an exciting journey, and we’re here to guide you through every step. If you’re thinking about purchasing a home, reach out to us to explore your loan options and see if an appraisal waiver could work for you!