Can banks lend money for a house that costs less?

Question

Lets say someone wants to buy a house for 150,000 but the real value of the house is 140,000 will the person still get the loan? Or the bank wont let the person get it?

--If banks wouldnt lend the person, then

Here is my another question--

Does that mean that if someone has a mortgage for 100,000

And i get it for 70,000 it means ím getting profit because banks wouldnt lend for a property that its worth less than the real value ?

Brian Adzadi · Answer

Account Closed

In all essence, yes that is exactly it. The bank will use their own appraiser to determine the value of the house. Whatever the appraiser determines is the price, will be the amount in mortgage the bank will give you. The bank will never give you more money than the house is worth. So if the appraiser says the 150K house is worth 130K, the bank will only give you 130K.

So how do you challenge that?

1. Pay for your own separate appraisal to be done and see if it comes to different figure

2. Tell the seller this is the amount bank's appraiser has determine the price to be and are they willing to bring down the price of the house to match it. (seldom does it work but hey you never know)

As for the second question, yes that is how instant equity works but your scenario is kind of skewed. I say that because the person selling the house originally bought it for 100K. Obviously it went down in value and that is why you are getting it for 70K. So you did not just instantaneously get 30K in profit. If you sold that house within a month, you will still be selling it for 70K.

The 70K you got it for is the current market value of the house. The only way you can make it worth 100K or more is to do some major improvements that will add value or if external factors like a big tech company or massive job growth occurs within the neighborhood to make the area and the house more valuable.