Done Asks: Dear Gina, I gave my broker my credit card information to order the appraisal on property I was buying. After the appraisal was completed, the loan was declined. Am I entitled to a refund of my appraisal charges because it was done in order to complete the loan and yet the mortgage was declined? There was no problem with property value, and the loan was declined after I was pre-approved.
I am sorry about your bad experience, and I'm afraid that I don't have good news for you. The fee for an appraisal is not a profit generator for your broker or the lender that he or she is working with. It goes straight to the appraiser for services rendered. So the broker doesn't have that money to return to you. You are, however, entitled to a copy of that appraisal.
Why Did Your Loan Get Declined When You Had a Pre-approval?
What concerns me more, however, is the fact that you had a pre-approval and yet the lender did not close your loan. I normally advise people with credit problems or bad credit to get credit approval before proceeding with something expensive like an appraisal. The fact that you couldn't close on your mortgage makes me think there might have been additional issues, such as:
1. You confused pre-qualifying with pre-approval. Pre-qualification is granted when the information that you provide to your loan agent indicates that you should be able to get a mortgage for a specified amount. Pre-approval or credit approval is a full approval of your qualifications as a borrower, meaning that you have applied for a loan and that your credit and documentation satisfied the underwriter, that you only need the property to pass muster for your loan to close. If you didn't have all that, you weren't pre-approved.
2. The property was not acceptable to the lender. Sometimes, properties appraise for at least the sales price, but are so unique that lenders won't touch them--for example, log homes, dome homes, homes off the grid, or large estates.
3. You failed the lender's final quality assurance check. These days, lenders probably pull your credit again right before closing to make sure that you have not acquired more debt, shopped for new credit, or picked up some bad credit. Lenders may also do a final verification of your employment or bank accounts. Changes for the worse could derail your loan, even if you have a pre-approval.
4. Your broker gave you bad information. This doesn't happen often, but it does happen. Mortgage brokers work with wholesale mortgage lenders, and sometimes the lender gives them incorrect information or even reneges on an approval. So your broker may have thought you were approved but in fact you were not.
When you find a new lender (this site is a good place to do that), submit a copy of the appraisal with your application so that your agent can tell you if there is any property-related issue that could make it hard to get a mortgage. Because of recent appraisal procedure reforms, your new lender may still have to order a new appraisal, but submitting the one you have can smooth out the process.