The Importance of Comparable Sales for Your Mortgage

In today’s mortgage market once you know you are credit qualified for a conforming mortgage, jumbo mortgage, or super jumbo mortgage the most important thing to have is making sure that your property you are purchasing or refinancing has good comparable sales.

The most scrutinized item in your loan application other than your income will be the appraisal of the property. Investors have really tightened up the guidelines for mortgage appraisals. They want to make sure that the property that you are obtaining a mortgage on has an accurate value to protect both you and them.

Remember that when qualifying for the mortgage you’re the down payment is based on the sales price or appraised value of the property, whichever is less. The greatest indicator and influence on the appraised value of your property are the surrounding recent comparable sales.

It is imperative that in a sales transaction that the listing agent has a minimum of three recent comparable sales, more of them is always better. The sales should have the following characteristics:

  1. They should be recent sales that have sold within 90 days of the appraisal. Most underwriting guidelines allow for sales up to one year old, but the more recent the better.
  2. The sales should all be within one mile of your property. Guidelines do allow for further distances, but the appraiser must address why he had to go further than one mile to find comparable sales.
  3. The comparables should be close in the square footage of your property and the lot sizes should be similar. Again appraisers can make some adjustments for differences, but only to a certain point.
  4. The comparable sales should be roughly of the same age, condition, and type of home.
  5. The comparable sales should be selling at a price close to your purchase price.

Since lenders can no longer have any contact with appraisers it is of utmost importance that the listing agent or selling agents have a list of at least three comparable sales that meet the above criteria.

Having these comparable sales upfront will make loan approval much easier. If there are not at least three comparable sales that support value, you’ll find loan approval for your mortgage much more difficult.

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