A low appraisal does not affect your locked rate. Your interest rate is determined by your credit profile, loan type, and market conditions at the time you locked, not by the appraised value. However, a low appraisal can change the loan amount and require renegotiation.
Here is how a low appraisal interacts with your rate lock and what steps you can take.
Your Rate vs. the Appraisal
Your locked rate is based on your credit score, debt-to-income ratio, loan type, and the date you locked. The appraised value of the home does not change any of these factors. So your rate stays the same even if the appraisal comes in lower than expected.
However, a low appraisal affects your loan-to-value ratio. If the home appraises for less than the purchase price, your lender will base the loan on the lower appraised value. This means you may need to bring more cash to closing or renegotiate the purchase price.
Renegotiating After a Low Appraisal
When the appraisal comes in low, you have several options. You can ask the seller to lower the price to match the appraised value. You can challenge the appraisal if you believe it is inaccurate. Or you can bring additional cash to cover the difference between the appraised value and the purchase price.
In a competitive market, some sellers may not agree to lower the price. In that case, you may need to decide whether to pay the difference or walk away. Your real estate agent can help you navigate this negotiation.
Rate Lock Impact
A low appraisal can delay closing, potentially pushing past your rate lock expiration date. If the appraisal issue takes time to resolve, you may need to extend your rate lock. Communicate with your lender early so they can help manage the timeline.
Bottom Line
A low appraisal does not change your locked rate, but it can affect your loan amount and closing timeline. Work with your agent and lender to resolve the appraisal issue quickly.
