What is a home worth?

[Anonymous]

What is a home truly worth and how do banks establish that number?  My wife and I are looking at purchasing a new home next year, but our current home is underwater.  Our ultimate goal is to be able to roll our current 2nd mortgage into our new home loan and then sell this house.

Now I know when the house sells the banks use the selling price as the value of the home.  However, what if the house appraises for more than the selling price and you go to refinance - what value does the bank use and when?  Essentially how quickly can you turn around and refinance?

Particulars - the home I am currently looking at is going for $330k.  Finishing construction I figure is another 60k.  My current 2nd mortgage is almost $44k.  If the home unfinished currently is appraised at $470k for tax purposes, and I finish it - shouldn't the appraisal go up?  So could I then roll everything together in order to sell my first home?

Thanks for any info.

Pat

[ShanetheMortgageMan]

You can't purchase a home and finance other debts into the new purchase loan, you may or may not have known that (I think I responded to another thread of yours).

Fannie Mae does not require any "seasoning" to use a new appraised value higher than the purchase price when you are looking to do a cash out refinance, however many lenders require you to own the home for 6 or 12 months (varies depending on the lender), and there are a few that will still go by the "no seasoning" requirement.  FHA requires you own the home for 12 months in order to use an appraised value higher than the purchase price.  If the new loan amount is above 80% of the value then you'll run into PMI companies seasoning requirements as well (this is on top of lenders requirements), and I'm pretty sure all PMI companies are requiring 12 months seasoning to use the new appraised value (higher than the initial purchase price) for refinances.  80% or less then you don't need to deal with PMI companies.  FHA is self-insured, and their guidelines apply for any loan-to-value.

Your theory works though, just have to find a lender who is OK using the new value without you having to wait 6 or 12 months, unless that timeframe would be suitable for you.

[Anonymous]

Thanks for the response - yep you did respond to another of my inquiries with lots of good info.  So I just have to find a bank willing to refinance quickly rather than wait - I could probably pull of 6 months but 12 might be difficult. 

Another quick question - is the taxable value and the appraised value have to be somewhat close to each other?  I have found 2 homes now that both have a taxable value of around $470k but are selling for $299k-$330k.   Is their any requirement that says the appraised value must be in line with the taxable value?

Thanks

Pat

[ShanetheMortgageMan]

Welcome.

No requirement for the appraised value to be near the taxable value, or vice versa.  Taxable value is another term for assessed value, and in some areas the assessed value isn't even close to the true market/appraised value of the home.  In some states the assessed value is about 1/3rd of the market value, and here in California the assessed value always seems to be about 10-25% less than the market value.  Further, the assessed value may only be updated once every X amount of years, so if it was assessed back in 2005 then it may not be anywhere near the true market value today.  The best source for determining market value is other comparable homes that have recently sold, the assessed value can often be misleading on what the true value of the home is.