Appraisal Process for Conventional Loans: Complete Guide

Buying a home is a major milestone, and if you’re financing your purchase with a conventional loan, the appraisal process plays a critical role. Understanding how home appraisals work can help you navigate the loan process more confidently and avoid common pitfalls.

In this guide, we break down what a home appraisal is, how it affects your mortgage, the steps involved, and what to expect from start to finish.

What Is a Home Appraisal?

A home appraisal is a professional, unbiased estimate of a property’s fair market value. It’s typically required by lenders to ensure the home’s value aligns with the loan amount being requested. This protects the lender from over-lending on a property that may not be worth the purchase price.

Key Points:

• Conducted by a licensed or certified appraiser.
  
• Required for most conventional loans.
  
• Ensures the loan amount is supported by the value of the home.
  

Why Appraisals Matter for Conventional Loans

Conventional loans are not government-backed, so lenders are particularly cautious about the value of the collateral. The appraisal ensures the property is worth the investment and reduces risk for both the lender and borrower.

If the home appraises for less than the purchase price, it can affect your loan approval. You may need to:

• Renegotiate the purchase price.
  
• Pay the difference in cash.
  
• Cancel the transaction (depending on the contract).
  

Need help comparing different loan types? Read our guide to FHA vs. Conventional Loans

Step-by-Step: The Appraisal Process

1. Appraisal Ordered by Lender

After your offer is accepted and you’ve started the loan process, the lender will order the appraisal through a third-party Appraisal Management Company (AMC).

2. Home Inspection by Appraiser

The appraiser visits the property to evaluate its size, features, condition, and comparable homes in the area.

3. Valuation Report Created

The appraiser submits a detailed report, usually within 7–10 business days, outlining the property’s estimated value and relevant comps (comparable sales).

4. Loan Decision Based on Appraisal

• If the appraised value meets or exceeds the purchase price, the loan moves forward.
  
• If it comes in low, the lender may adjust the loan amount or require the buyer to bring additional cash to the table.
  

What Can Affect Appraised Value?

Several factors can influence the final value:

• Location and neighborhood trends
  
• Comparable recent sales
  
• Size and layout
  
• Condition of the home
  
• Renovations or upgrades
  

Tip: Even minor repairs and a clean presentation can positively impact the appraiser’s impression.

How to Handle a Low Appraisal

If the appraisal comes in below the agreed purchase price, here’s what you can do:

1. Request a Reconsideration of Value (ROV)
   Provide recent comps or evidence that the appraisal was inaccurate.
   
2. Negotiate with the Seller
   Ask the seller to reduce the price to match the appraised value.
   
3. Cover the Gap
   Bring additional cash to cover the difference between appraised value and purchase price.
   
4. Walk Away
   If your contract includes an appraisal contingency, you may be able to exit the deal without penalty.
   

Have appraisal questions? Contact our mortgage experts for a free consultation.

FAQs: Conventional Loan Appraisals

Read Next

Looking to expand your knowledge about mortgages and home buying? Check out these helpful articles:

• The Top 5 FAQs About FHA Loans in Michigan
  
• FHA First-Time Homebuyer Loan: Your Path to Homeownership