Dealing With A Low Home Appraisal

If you tell your lender over the phone what your home is worth to try to get a refinance going and then the home is appraised and it is worth much less, you are not likely to get the refinance.

That's the way it works. Home values are plunging. Refinances only make sense for a lender if you have sufficient equity in your home.

If you are sufficiently underwater on your mortgage, it may make the most sense to walk away.

The Washington Post reports:

You told the lender on the phone what your property was worth. The lender priced the loan based on that information. Unfortunately, your estimate of what your property was worth was $50,000 short. Because you don't have the equity that the lender requires, you cannot get the loan you were hoping to get.

If you look at the paperwork, you'll probably see language that requires your home to appraise out in order to qualify for the quoted interest rate, fees and terms.

The lender isn't trying to scam you. It's that the government is backing about 90 percent of loans out there, and Uncle Sam is extremely strict about the home equity you have during a refinance.