By AnnaMaria Andriotis
The appraisal might be too low
Before approving a refinance, banks require an appraisal of the home to confirm its value. But over the past year, a growing number of appraisals have been finding home values to be lower than what homeowners expected. That’s largely due to foreclosure sales that lower the value of nearby properties. If the appraiser finds the value of a home to be less than the amount the borrower wants to refinance for or finds that the home doesn’t have enough equity to meet the bank’s requirements, the lender could pull the plug on the refi, says Lattas.
There are few options for homeowners at that point. When the same problem arises with a home purchase, it’s possible for borrowers to renegotiate the purchase price with the seller. But in refinances, the recourse borrowers have is to refinance with another lender — though there’s no guarantee it will come out any different.
Before approaching a lender for a refi, homeowners should try to get an idea of the value of their home, says McBride. Review nearby listings of similar homes to see what prices they’re asking for and speak with a realtor who knows how much homes are actually selling for.