This Mortgage Lender Is Making Borrowing Cheaper

Borrowers could be in line for a credit that saves them big time.

Buying a home is a costly prospect. Not only do borrowers have to come up with money for a down payment, but they also have to fork over a series of fees -- known as closing costs -- to finalize their mortgages.

But one mortgage lender is now taking steps to help ease that burden. And it could spell relief for borrowers in the near term.

A credit for appraisal fees

Mortgage rates have started off the year higher, making buying a home even more expensive. Throw in closing costs, and it's no wonder so many buyers deplete their savings on the road to owning a place of their own.

Now, United Wholesale Mortgage is offering borrowers a chance to snag a $600 credit for their appraisal fees through March 31. The goal is to kick-start mortgage activity, which may grow increasingly sluggish as rates continue to climb.

Home appraisals are a standard part of the closing process. During an appraisal, an independent professional comes in to assess a home's features and condition. Based on that, and the general state of the local housing market, an appraiser will then assign a value to the home.

Mortgage lenders need reassurance that the homes they're loaning out money to buy are worth enough to cover those loan balances. So if a borrower is seeking a $250,000 mortgage, the home in question will generally need to appraise for at least that much. That way, if the borrower defaults on their loan, the lender can sell the home to get repaid.

It's common practice for borrowers to cover the cost of their home appraisals. So the $600 credit from United Wholesale Mortgage might help make the entire home-buying process more affordable for borrowers who can take advantage of that savings.

Other ways to save on an appraisal

Right now, this appraisal credit is unique to United Wholesale Mortgage. But borrowers who are working with other lenders might still have options for lowering their costs.

For one thing, borrowers can ask to hire their own appraisers rather than work with the ones their lenders commonly turn to. If a lender agrees to this arrangement, it could result in savings.

What's more, with home values being so high across the board, some lenders have been waiving the appraisal requirement for refinances. Those looking to swap their existing mortgages for new loans can ask to have their appraisals waived to avoid that fee.

Though home appraisals have long been a fixture in the closing process, they make getting a mortgage more expensive. The fact that some borrowers may have a chance to effectively pay nothing for an appraisal could make it possible for more people to purchase homes in the near term.

Right now, home prices are extremely inflated, to the point where many buyers who would otherwise manage to afford a place of their own are instead being shut out of the real estate market. And since home prices are unlikely to come down until housing inventory ramps up substantially, small breaks like free appraisals are really a boon to buyers.