Solution · Plan for a lower valuation
Appraisal Gap
An appraisal gap is the difference when a financed home’s appraised value is below its agreed purchase price. A $700,000 price and a $690,000 appraisal create a $10,000 gap.
The gap is not automatically the extra cash you need.
The lender generally bases allowable loan-to-value on the lower of price or appraised value. The effect on your loan and closing funds depends on the financing structure.
A few things matter.
- Additional verified cash may help, if contributing it leaves you comfortable.
- An approved higher loan-to-value structure may provide flexibility; eligibility, payments and mortgage insurance need review.
- A gap larger than your reviewed capacity still needs a fallback plan.