A First-Time Homebuyer's Guide, Start To Finish - The Strategic First-Time Homebuyer Book - Chapter 9 Under Contract: Inspections and Appraisals

April 28, 2026

r/NewbHomebuyer

.....This is chapter 9, just scroll down a little beyond the intro and you'll pick up where you left off......

Hey guys, I spent a lot of time writing this book, and I had this subreddit in mind as I was writing it, so I thought I would post it here for you for free. If you want the physical book you can always go on Amazon, but here's my gift to you 😄

I'll include links so you can jump between chapters easily.

I hope you find it helpful.

The Strategic First-Time Homebuyer

Start to finish, with strategies to get approved and save thousands in interest, costs, and the down payment.

Introduction 1

Chapter 1 How Much Can I Afford? 3

Chapter 2 How Much Cash Do I Need? 16

Chapter 3 How To Find The Down Payment 30

Chapter 4 Your Debt To Income Ratio 41

Chapter 5 Choose Your Lender 69

Chapter 6 You’ve Been Denied (Your Credit) 80

Chapter 7 Selecting a Real Estate Agent 90

Chapter 8 Shopping For a House108

Chapter 9 Under Contract: Inspections and Appraisals 121

Chapter 10 Under Contract: Rate Lock and Underwriting 129

Chapter 11 How To Lower Your Rate 144

Chapter 12 Closing 163

Chapter 13 Post Closing 171

About the Author 190

Glossary 191

Chapter 9

Home-shopping was the fun part.

This is where you feel the stress.

I’m not saying stress is bad. It helps you pay attention to the details. Being under contract is a big deal, and you don’t want to mess it up, right?

You’ll be juggling several things all at once. Let me list them for you here:

● Inspection

● Shopping for a mortgage

● Shopping for title insurance

● Shopping for homeowners insurance

● Rate lock and buydown

● Underwriting

● Appraisal

Inspection

A home inspection is where an inspector takes the perfect, ideal home, and shows you where it fails to meet perfection.

No house is perfect. Some houses are less perfect than others.

Before you faint from seeing the list of imperfections, just know that the house isn’t crumbling down on the owners. The maintenance needed on the house will have different buckets, like the urgent bucket, these are things where your safety is at risk for as long as you fail to address it, and there will be other buckets of maintenance that are less urgent, like old HVAC and roof, but are still costly.

By the end of your inspection you’ll feel so overwhelmed that you may think that renting is the better gig.

There are two moments of sticker shock for buyers.

The first is “A mortgage for this house is how much??”

The second shock is the inspection results.

But if you mentally prepare ahead of time thinking “there will be issues, and I will expect to budget and plan for maintenance” you won’t feel the shock as badly.

Get a home inspection done ASAP.

You only have a set time in your contract for due diligence, and the sooner you get the inspection done, the sooner you can start negotiating repairs and concessions from the seller.

And yes, you should get an inspection done on a new build.

Homes are built fast, and things can get missed. They might forget to install light switches, they might do improper installations, which could cost you thousands of dollars to fix the issue.

New homes come with warranties, yes, but these issues frequently pop up outside of your warranty period.

Let’s say you waived your due diligence period. Even as a new homeowner I’d still get an inspection done. These inspections help you plan and budget maintenance to keep your home safe and working properly.

Do your future self a favor and get that inspection done.

Appraisal

The appraisal lets you know someone’s opinion of the value. An appraiser will take into consideration similar homes that have sold within a mile radius within the past 6 months.

There are four likely scenarios that play out:

● The appraised value comes at or above value, as-is

● The appraised value comes at or above value, contingent on repairs

● The appraised value comes in below value, as-is

● The appraised value comes in below value, contingent on repairs

Government-backed loans like FHA, USDA, and VA have a bigger checklist of requirements for the home than a conventional mortgage. So the chances of repair contingencies is higher with that type of loan.

Repair Contingencies

Most contingencies are easy to deal with. The top two are:

● Exposed wires (cover them)

● Flaking paint (scrape off and repaint)

Other appraisers may flag certain aspects of the home and require a licensed professional to review it. Two examples would include:

● Roof

● Foundation

For the foundation, a structural engineer will be asked to review the home for safety and write a report. If repairs are needed, your agent will need to negotiate the repairs.

For the roof, a roof inspector will be asked to review it to determine the remaining life, and check for any leaks. If repairs are needed, your agent will negotiate those repairs.

I won’t cover all possible issues that may come up, but those are the most common.

Low Value

If the appraised value comes in lower than the purchase price, here are your 4 options:

Cancel the Contract

That's a little aggressive, right?

Depending on your contract, you may have it in writing giving you the option to back out if the appraisal comes in lower than the purchase price.

Most standard contracts do but always double-check. If that clause is there, you can walk away without penalty.

Let's explore other options that aren't as aggressive.

Ask the Seller to Lower the Price

When I listed my own home, the appraisal came in lower, and I dropped my price for the buyer.

The buyer was an FHA buyer with a minimum down payment available.

We weren't in a sellers market, we only had two showings, and I didn't know if we'd be able to get another offer.

It doesn't hurt to ask.

Pay the Difference in Cash

Here's an example. Say you're doing a minimum down payment. (3% for conventional first-time buyers)

When you do 3% down, this puts your loan at 97% loan-to-value. That's your loan amount over the value.

That's what the lender cares about. LTV.

So when an appraisal comes in low, the lender wants to make sure you stay at 97% LTV.

With a purchase price of $500,000 and $15,000 down, you’re at 97% because your loan is at $485,000.

485,000 ÷ 500,000 = 97%

If appraisal comes in at $495,000, then you won't be at 97% anymore.

485,000 ÷ 495,000 = 97.9%

You'd need to lower your loan amount to $480,150 in order to stay at 97% LTV.

The catch is that the seller still wants $500,000 but the lender is using $495,000 for the value.

With a loan amount of $480,150 and a purchase price of $500,000, the total cash you’d have to pay is $19,850.00.

$14,850 to stay at 97% LTV and the other $5,000 to give the seller for the asking price.

The same concept would be applied here if you were trying to keep your down payment at 20%.

Don't Do Anything

This only works if you were planning to put more than the minimum down anyway.

Let’s say you were originally planning to put 10% down on that same $500,000 purchase, so $50,000 down, and a $450,000 loan. That’s a loan-to-value of 90%.

But then the appraisal comes in at $495,000.

Now, your loan is still $450,000, but the lender uses the lower of purchase price or appraised value to calculate LTV. So your LTV just ticked up a little:

$450,000 ÷ $495,000 = 90.9% LTV

Still under 95%, so most lenders are fine with it. Your monthly mortgage insurance might go up slightly, and you’ll have a little less equity than expected, but you don’t have to bring in any extra cash. You’re still putting down the same $50,000

Your money just covers a larger share of the gap now.

So if you’ve got a healthy cushion in your down payment, you might be able to just shrug and move forward.

If you're trying to avoid mortgage insurance, and want to keep your LTV at 80% to avoid mortgage insurance, then this won't work.

Fight the Appraiser

This one is tough because appraisers are masters of jiu jitsu, but if you can beat him/her into submission, you might be able to get a higher value.

The only way I've seen an appraiser correct for a higher amount is when the agents were able to point out any omissions in the appraisal report that should account for a higher value.

Things like incorrect data, square footage, incorrect number of bedrooms or bathrooms, lot size misreported, or things like upgraded hardwood floors.

Going off comps alone is a tough battle because the appraiser probably feels like they are the masters of comp selection.

High Value

What happens if the appraised value comes in higher than the purchase price?

Nothing bad happens here.

Lenders use the lower of the two: purchase price, or appraised value. If the value comes in higher, your initial terms remain the same. You just get a little more equity than you had planned on.

The seller doesn’t have to know what the value came back at. You paid for the appraisal, not the seller.