Paying for appraisal before loan approval

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When going through the mortgage process to purchase a home in Illinois, buyers will frequently ask – Should I pay the appraisal fee upfront before the lender completes full approval? Or is it possible to wait and cover the appraisal cost at closing instead?

Paying for Appraisal before Loan Approval

In most real estate transactions in Illinois, the lender will require the appraisal inspection fee to be paid upfront at the time it is ordered, which is usually a few weeks into the loan application process. The fee cannot be deferred until final loan approval or closing in most cases.

Paying for Appraisal before Loan Approval: In Illinois, lenders require the appraisal fee upfront to order the appraisal, assure appraisers’ payment, make loan approvals, etc

Why do lenders want you to pay the Appraisal fee upfront?

Many lenders will collect the appraisal fee upfront at the time of initial loan application, along with any other processing fees like credit checks or employment verification charges required early on.

There are valid reasons why lenders need this payment early in the mortgage process rather than waiting until the end:

  1. The lender orders the appraisal on behalf of the borrower, so they need to collect the fee upfront before releasing the work order to the appraiser directly.
  2. The appraiser’s inspection obviously cannot take place until the appraiser has the assurance they will be paid for their work. Appraisers do not work on credit.
  3. Lenders require the full appraisal report and analysis prior to making final mortgage approval determinations. Deferred fees prevent this.
  4. Requiring appraisal and other upfront third-party report fees early in the process helps validate the buyer is fully committed to obtaining financing.
  5. Any charges paid outside closing must be disclosed on initial Loan Estimates and cannot be deferred.

While there may be some minor flexibility on exactly when the appraisal fee is collected during the mortgage transaction, paying for the appraisal upfront before final loan approval is standard practice for most lenders on purchase loans.

Learn more about how long the appraisal takes, how much the appraisal costs and can the mortgage loan be denied after appraisal.

The Takeaway 

Don’t be surprised if your lender requires you to pay the appraisal fee upfront around the time it is ordered a few weeks into the process, rather than waiting until the closing. 

This upfront fee policy is not meant to overcharge but rather reflects standard mortgage lending procedures and guidelines.

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