If you purchase a home for 192500 and it was appraised at 200000....?

Question

Does that mean you have equity when the loan closes? How do they determine equity and how can we increase equity in our new home?

Answer 1

Congrats u got a house under value.
Don't think about the equity as the market will be adjusting soon enough. check ur local paper.
increase ur equity ? get 2nd jobs and pay down the loan. easiest way. make sure u have cash saved for real emergencies.

Answer 2

At the time of appraisal you had 3.75% equity in the home or about $7500. Dependent upon where you live you might actually be out of equity in the next 6-12 months. as prices are dropping. significantly and will continue to do so for the next year or two. Hope you did get a fixed rate, and not an ARM, due to reset in a year, or worse an interest only mortgage. You can increase equity by owing less than it is worth, and it is only worth what someone will pay for it. The appraised value is a guideline, the market value is it's true value. To clarify when the house was appraised at $200K that is what the market supported at that time, since you paid 192500 that is what it is worth, if you financed 100%, you have no equity

Answer 3

Yes. Equity is the appraisal value minus what you owe on the property. You increase the equity by 1.) Paying down the principal and 2.) increasing the value of your home which raises the appraisal value. You can do this by making improvements in the home that increases it value. But be careful, many people "invest" in their home only to find out later that their investment did not raise the value of their home (money down the drain). Pools are a popular example. Except maybe in Arizona, pools do not generally increase the value of a home. Most anything done to the outside of a house may increase the curb appeal or buyer interest but does nothing for the actual appraisal value. Popular good investments are upgrading to hardwood floors, installing energy efficient high-end appliances (stainless steel is the favorite right now), granite or other high-end counter top in bathrooms and kitchens, fixing any structural damage, etc..

Answer 4

By the time you pay closing costs you're going to really have equity but if you're buying to live in it and you bought it from a realtor it's to be expected.