Either way, it helps to have a backup strategy with your lender and to know your options before the appraisal is in. On a purchase, a low appraisal usually has several workable answers, and the first one isn’t a lending decision at all.

Read: Understanding the numbers behind a bidding war offer

Start with the Purchase and Sales Agreement

Your purchase and sale agreement, and any financing addendum attached to it, decide what happens when the appraised value is lower than the price. Depending on how it’s written, a low appraisal may:

• Give the seller the option to reduce the price
• Give the buyer the option to cancel, usually only within the contract’s deadlines
• Leave the deal in place, with the buyer choosing to move forward at the agreed price

Your agent is the right person to walk through those terms with you, including deadlines, whether an appraisal contingency is in place, and whether you agreed to cover any gap. If you’re using FHA or VA financing, the contract generally must include language protecting the buyer when the appraisal comes in under the price, so ask your agent to point it out. Negotiating price is your agent’s territory. What I focus on is how the financing works once the appraisal is in.

Read: Appraisal Guide for Washington Homebuyers

How the Lender uses the Appraised Value

The lender bases the loan on the lower of the appraised value or the purchase price. If you’re paying $800,000 and the home appraises at $775,000, the lender treats the home as a $775,000 property when it calculates loan‑to‑value (LTV). If the home appraises for more than the purchase price, the lender will use the purchase price for the value.

When an appraisal comes in low, it doesn’t automatically mean you need to bring more cash. Often the lender is simply looking at a different LTV, and the transaction can still move forward at the agreed price.

Example: $800,000 Price and a $775,000 Appraised Value

Say a buyer planned to put 20% down ($160,000) on an $800,000 home, for a $640,000 loan. The appraisal comes in at $775,000, which puts the LTV at about 83%. Here are three ways to handle it.

• Keep the $640,000 loan and add mortgage insurance. The buyer brings the same $160,000, and because LTV is now above 80%, a conventional loan typically needs private mortgage insurance (PMI). The change to the monthly payment may be very slight, and depending on the structure PMI can also be paid as a one‑time charge. The cost depends on credit score and other factors, so I run both versions side by side. If paid monthly, the private mortgage insurance will automatically drop off when the loan balance reaches 78% based on the value used by the lender (a balance of $604,500 based on this example).
• Use a “piggyback” second mortgage to bridge the gap. Structure the first mortgage at 80% of the appraised value, which is $620,000, and add a $20,000 second mortgage. That essentially keeps your total funds for closing the same as originally planned. A second mortgage may carry a different rate and payment than the first, and availability depends on the lender and loan program.
• Reduce the loan to avoid PMI. At 80% of $775,000, the loan would be $620,000. The buyer would bring $180,000, which is $20,000 more than planned.

If a buyer is putting down more than 20%, a lower appraised value may have no impact as far as the lender is concerned, as long as the loan‑to‑value based on the appraised value stays at or below 80%. For example, with 25% down on this same home, the loan would be $600,000, which is about 77% of the $775,000 appraisal. The buyer’s cash to close wouldn’t change, and PMI wouldn’t come into play.

A smaller down payment can change the math

The less you put down, the more likely a low appraisal turns into a cash requirement. For example, with 5% down on that same home, the loan would be $760,000. If the program caps the loan at 95% of the $775,000 value, the maximum is $736,250, so the buyer would need roughly $23,750 more at closing. That’s why we run the numbers to help you make an informed decision.

Ask about a Reconsideration of Value

If your agent believes the appraiser missed relevant comparable sales, a reconsideration of value (ROV) is worth a look. Agents are often the best source for those comps, such as recent closed sales that are similar in size, condition, and location. The request goes through the lender, not directly to the appraiser, and the appraiser isn’t required to change the value. An ROV also doesn’t pause contract deadlines on its own, so ask your agent whether an extension is needed while it’s pending.

What to do first when the appraisal comes in low

1. Connect with your Loan Officer. Your lender will notify you that the appraisal came in low and will typically let your agent know as well, so you can consider your options together.  
2. Check your contract deadlines. Know what options are still open and for how long.
3. Run the loan scenarios. Compare keeping the loan with PMI, reducing the loan, and bringing additional cash.
4. Decide with your agent whether to ask for an ROV, renegotiate, or move forward as is.

Frequently asked questions

Can the lender still use the purchase price if the appraisal is low?

No. The lender uses the lower of the appraised value or the sales price to determine the loan amount. The buyer can still choose to buy at the agreed price if the contract allows it.

Do I always have to bring extra cash if the appraisal is low?

Not always. With 20% down, you may be able to keep the same loan amount and add mortgage insurance instead. A smaller down payment makes extra cash more likely.

Can I walk away from the contract?

It depends on your purchase and sale agreement and its deadlines. Your real estate agent can confirm what your contract allows.

Can I get a second appraisal?

On a purchase, the usual first step is a reconsideration of value with supporting comps. A new appraisal may be considered if the original contains factual errors, but that depends on the lender and loan program.

If you’re thinking about buying a home located anywhere in Washington state, let’s talk!

Even if your plans are for next year, you can’t start the process to early and we can begin with a discovery call. 

Recap From Last Week

The Fed kept its benchmark Fed Funds Rate unchanged, following September’s quarter-point hike. As a reminder, the Fed Funds Rate is the overnight rate banks charge each other — it’s not the same as mortgage rates. The hold was widely expected, but the vote wasn’t unanimous: two members dissented in favor of another quarter-point increase.

Inflation was in line with expectations but remains above the Fed’s 2% target. Headline PCE inflation rose 3.6% over the past year, while core inflation, which excludes food and energy, rose 3.1%. The Fed will keep weighing inflation and labor market conditions as it makes future decisions.

In housing, new home sales slipped 0.6% in September to an annualized pace of 676,000, beating expectations but down 5.3% from a year earlier. The median new-home price fell 3.9% year over year, but that doesn’t necessarily mean home values are declining. More buyers purchased homes priced between $300,000 and $400,000, while sales of homes above $600,000 fell, and that shift pulled the median down. Broader measures are still rising, with national prices up 2.1% over the past year according to Case-Shiller.

Finally, the economy grew at an annualized rate of 3.4% in the third quarter, up from 2.2% in the second, supported by consumer spending and business investment, including continued investment in AI data centers.

Where Mortgage Rates Are Trending

Optimal Blue’s index showed the average 30-year fixed rate improved slightly as of last Friday, October 30, compared with the previous update. Watch the video for the latest figure.

Please keep in mind that this index reflects about 35% of mortgage transactions nationwide (lenders who use Optimal Blue). It’s not a rate quote, and you can’t lock last week’s rates today. Your credit score, loan-to-value, and other factors will affect the rate you qualify for. It’s simply meant to give you an idea of which way rates are trending.

On the mortgage-backed securities (MBS) front, as of about 10 a.m. Monday, MBS were up slightly — a sign that mortgage rates may be improving.

This Week’s Economic Calendar

It’s jobs week! Both ADP and the BLS are expected to show 65,000 jobs added for October. The revisions in Friday’s BLS report could be just as impactful.

• Tuesday: JOLTS
• Wednesday: ADP Employment (65,000 jobs expected)
• Thursday: Jobless Claims
• Friday: BLS Jobs Report (65,000 jobs expected, unemployment unchanged at 4.2%) and Consumer Sentiment

Next FOMC meeting: December 8–9, 2026.

Spotlight: Down Payment Assistance Programs

Down payment assistance programs (DPAs) and grants are getting more attention, including Zillow’s recently promoted program. That’s great — but it’s important to understand the terms before you commit.

• Required first mortgage: With a DPA, you’re often required to use a specific first mortgage, which may carry a higher rate than you’d get without assistance — sometimes due to price adjustments for a lower down payment, sometimes because the program itself has a higher rate.
• “Forgivable” doesn’t mean immediate: Some programs, like Zillow’s, are forgivable after a set period. As I understand it, Zillow’s requires you to keep your first mortgage for five years. Sell or refinance sooner and you would repay the assistance, or you’d have to wait and possibly miss a refinance opportunity.
• Second mortgages: Some programs are structured as a second loan. Some carry interest; others are zero-interest but paired with a higher first-mortgage rate.
• Bundled options: Some programs combine assistance with installing energy-efficient solar panels.
• Eligibility rules: Some require you to be a first-time homebuyer. Others, like the WSHFC’s Covenant Homeownership Program, are for those whose ancestors experienced housing discrimination, such as redlining.

As the old saying goes, there’s no such thing as free money. Understanding the true cost — whether that’s a higher rate or a commitment to keep the loan for years — helps you make a decision that works for you.

Read more: How to Choose a Down Payment Assistance Program

Let’s Talk

That’s a wrap! If I can answer any questions or help with a purchase, refinance, or restructuring debt — even if you’re months away from making a move — please reach out. Also, don’t forget to vote tomorrow, and go Seahawks!

Optimal Blue data reflects about 35% of mortgage transactions nationwide and is not a rate quote. Rates and programs are subject to change and depend on individual qualifications. This is not a commitment to lend.

Two programs can offer the same dollar amount and behave completely differently when you sell, refinance or simply watch rates drop. Here’s how I walk Washington homebuyers through the comparison.

Grant, forgivable loan or deferred loan?

“Down payment assistance” is a label that covers very different products. A true grant never has to be repaid. Most programs are actually second loans, and they fall into a few categories:

• Forgivable loans — the balance is forgiven if you meet conditions, usually staying in the home and keeping the first mortgage for a set number of years.
• Deferred‑payment loans — no monthly payment, but the balance (sometimes with interest) comes due when you sell, refinance or move out.
• Low‑interest second loans — repaid monthly alongside your first mortgage.

Which category you’re in matters less than the exact terms attached to it.

The six questions I ask about every down payment assistance program

1. Is it forgivable, and what are the conditions?

Forgivable sounds like free money, but the conditions are the whole story. Zillow Home Loans recently launched an FHA down payment assistance program in most states, including Washington. It provides up to 3.5% of the purchase price (or appraised value, if lower) as a second loan with no interest and no monthly payment. It’s forgiven after five years of on‑time payments on the first mortgage while you live in the home. If you sell, move out or refinance before that five‑year mark, the assistance must be repaid in full.

That can be a great fit if you plan to stay put. But if rates fall in year two or three, a refinance would mean paying back the full assistance amount to get the lower rate. Run that math before you choose it.

2. What happens when you sell or refinance?

Some programs, including the Washington State Housing Finance Commission (WSHFC) down payment assistance options, are structured as deferred second loans. Nothing is forgiven over time. The balance becomes due when you sell or refinance, whether that happens in year two or year twenty. That isn’t necessarily bad, since you aren’t penalized for timing and you don’t owe a monthly payment. It just means the assistance is a cost you’ll settle later, not a gift you earn by staying. 

3. Does it allow a refinance if rates improve?

This is where programs differ most, and where buyers get surprised. Some programs allow a refinance, but only if the assistance is paid off at closing. Others may allow the assistance loan to stay in place, which keeps your options open.

Here’s an example of why that matters. If you buy with an FHA loan and your DPA program allows it to remain in place, an FHA streamline refinance may let you lower your rate later without a new appraisal, so your home’s value and your loan‑to‑value ratio aren’t a factor. That can be a real advantage if rates drop. Streamline refinances have their own requirements, including a net tangible benefit and a seasoning period, and the assistance lender typically has to agree to stay in second position. 

4. Which first mortgage does it require?

Most down payment assistance is tied to a specific first mortgage, and the first mortgage brings its own underwriting rules. Some programs pair with conventional, FHA, VA or USDA loans. Others work with only one. Zillow’s new program, for example, is for FHA loans only, while WSHFC assistance must be paired with a WSHFC first mortgage, which can be used with several loan types. 

That choice affects more than eligibility:

• Credit and debt‑to‑income guidelines — each loan type has its own standards, and the program or lender may add stricter minimums on top.
• Mortgage insurance — FHA mortgage insurance and conventional private mortgage insurance work differently, and conventional PMI may be removable later. VA loans have no monthly mortgage insurance, and USDA has its own fee structure.
• Property and location rules — USDA, for example, has geographic and income limits, and each loan type has its own appraisal and property condition standards.
• Your refinance options later — an FHA streamline is available only if you have an FHA loan, so the first mortgage type shapes your exit strategy.

The best assistance program on paper may not be the one your first mortgage can actually use. Choosing the loan and the assistance together, not one after the other, is how you avoid a mismatch. 

5. How will your home value and loan amount affect your options later?

The assistance doesn’t exist in a vacuum. If your first mortgage plus the assistance loan is close to your home’s value and the market softens, you may have limited options to refinance, or even to sell without bringing cash to closing. A program that looks generous at purchase can look different if you need to move in three years.

 6. What does it actually pay for?

Some programs cover only the down payment. Others also cover closing costs. A few are even designed to help finance energy upgrades such as a solar system along with the assistance. That can be valuable if you want those upgrades, but it adds another layer to the repayment and refinance picture, so ask exactly how it’s secured and repaid.

Compare total cost, not just the assistance amount

The only reliable way to choose is to look at every realistic scenario side by side. Ask your lender for a total cost analysis that projects how each option plays out if you stay five years, move in three, or refinance when rates change. That should include the first mortgage rate each program requires, mortgage insurance, the assistance balance and any interest on it, and your estimated equity at each point.

Sometimes the program with the biggest assistance amount isn’t the cheapest over time. Sometimes no assistance at all, with a slightly lower down payment and a conventional loan, comes out ahead. You only know by running the numbers.

Frequently asked questions

Is down payment assistance the same as a grant?

Not usually. A grant never has to be repaid. Most down payment assistance is a second loan that is forgivable, deferred or repaid over time, so the repayment terms matter.

Can I refinance if I have down payment assistance?

It depends on the program. Some require the assistance to be repaid at a refinance. Others may allow it to remain in place. Ask before you choose a program, not after rates drop.

What happens if I sell before a forgivable loan is forgiven?

In most forgivable programs, the full balance is due when you sell or move out before the forgiveness date. Confirm the exact conditions in the program terms.

Read: Down Payment Assistance for Washington State Homebuyers

Not sure which program fits your plans? Schedule a free discovery call and I’ll walk you through your options and a total cost comparison for your situation.

Welcome to your mortgage rate update for the week of October 26, 2026. Watch the video above or read the highlights below.

Recap: Housing Activity Cools

Last week’s data showed a slowdown across the housing market:

• Pending home sales fell 7.3% in September from August and 11.3% from a year ago, with declines in all four U.S. regions (NAR).
• Housing starts dropped 5.2% to an annual pace of 1.22 million homes, and building permits edged lower as well.
• Builder confidence hit a 14-year low in October as high mortgage rates, labor shortages, and rising building costs weigh on the industry. Limited new supply could help support home prices in the months ahead.

Meanwhile, investors moved toward the safety of U.S. Treasuries amid unrest in France and growing concerns about AI-related debt. That demand for bonds is helpful for mortgage rates.

Where Mortgage Rates Are Trending

Optimal Blue reports that the average 30-year fixed rate are essentially unchanged from the prior week.

This index reflects about 35% of mortgage transactions nationwide and is not a rate quote. You can’t lock last week’s rate today, and your credit score, loan-to-value, and other factors will affect the rate you qualify for. It’s intended to show which direction rates are trending. I’m happy to provide you with current mortgage rates based on your personal scenario.

As I recorded this update, mortgage-backed securities (MBS) were flat, with a bit of green on the chart, a good sign for rates holding steady.

This Week’s Economic Calendar

It’s Fed week and a big week for earnings, with about 36% of the S&P 500 reporting, including Microsoft, Amazon, and Alphabet. The Fed is not expected to change rates at this meeting, but markets are pricing about a 73% chance of an increase in December.

• Tuesday: ADP Weekly, Durable Goods Orders, Case-Shiller & FHFA Home Price Indexes, New Home Sales, Consumer Confidence
• Wednesday: Fed Rate Announcement (FOMC meets October 27–28)
• Thursday: Jobless Claims, Personal Consumption Expenditures (PCE), Gross Domestic Product (GDP)
• Friday: Employment Cost Index, Chicago PMI

For Real Estate Agents: UAD 3.6 Appraisal Changes

Join me this Thursday at 11:00 am for a one-hour Zoom on the major changes coming with the new UAD 3.6 conforming appraisal format and how it will affect you and your clients. My guests are Mallory Lamb, Appraisal Manager at New American Funding, and Shaun Moore, Certified Residential Appraiser. The changes take effect next week, and some lenders are already piloting the new format.

Grab your lunch and laptop, then contact me for the link or to RSVP.

Spotlight: Have a Home-Buying Game Plan

This week I ran numbers for a potential client looking at a home just under $900,000 with a 30-year fixed conventional loan and 20% down. We compared a $50,000 price reduction with a $25,000 seller credit used to buy down the interest rate. The rate buydown lowered their monthly payment by a couple hundred dollars more than the price reduction did, and it kept more cash in their pocket at closing.

The Mortgage Bankers Association and Fannie Mae are both forecasting rates in the low-to-mid 7% range next year. Forecasts are only forecasts, but if you’ve been waiting for rates to fall, it may be a long wait.

A seller-paid rate buydown is a bit like having the seller pay for your future refinance, and over time it can save you more than a price reduction at today’s market rate. The key is working with a lender who will run the numbers for your situation and provide you with a Total Cost Analysis.

Let’s Talk About Your Options

Whether you’re buying, refinancing, or exploring a retirement mortgage, I’d love to hear from you. 

Rhonda Porter, Mortgage Advisor | NMLS #121324. Rates and programs are subject to change without notice. Your rate depends on your credit, loan-to-value, and other factors. This is not a commitment to lend.

Welcome to Mortgage Porter Weekly for the week of October 19, 2026. Each week I break down what’s moving mortgage rates and what it means for you. Watch the video above and read on for the highlights.

Recap From Last Week

Inflation ran hotter than expected in September. Consumer prices rose 0.6% for the month, pushing annual inflation to 3.7%. Core inflation, which leaves out food and energy, rose 2.6% over the past year, also above forecasts. Wholesale inflation came in hotter than expected, too.

Normally, readings like these put pressure on bonds. But concerns about AI companies triggered a flight to safer investments, which helped offset some of that pressure. This matters because the Fed raised its benchmark Federal Funds Rate by 25 basis points last month, due in part to persistent inflation, and the meeting minutes showed that most members believed another hike would likely be appropriate by year-end. With two Fed meetings left this year, in October and December, investors will be watching to see how the latest inflation data affects that timeline.

• Existing home sales: Sales rose 1.5% in September, ending a three-month decline, but were still down 2.2% from a year ago.
• Housing supply: Homes available for sale increased 1.9% from August and 4.6% from a year ago, which means more choice for buyers.
• Retail sales: Sales rose 0.8% in September, more than double expectations, but higher gas prices boosted the headline number. Excluding gasoline, sales grew just 0.2%, suggesting underlying consumer spending may be softer than the headline implies.

Optimal Blue Index Mortgage Rates

Optimal Blue reports that the average 30-year fixed rate as of last Friday, October 16, was 7.276%, slightly improved from what I shared last week.

Please keep in mind that the Optimal Blue index reflects about 35% of mortgage transactions nationwide (lenders who use Optimal Blue). It’s not a rate quote. You can’t lock last week’s rates today, and your credit score, loan-to-value, and other factors will affect the rate you may qualify for. This is simply intended to give you an idea of how rates are trending.

Click here for a current rate quote for your personal scenario.

This Week’s Economic Calendar

It’s a light week for economic data, and Iran will continue to influence the direction of mortgage rates.

• Monday: Housing Market Index
• Tuesday: ADP Weekly, Housing Starts & Permits, Pending Home Sales
• Wednesday: 20-Year Auction
• Thursday: Jobless Claims
• Friday: Consumer Sentiment

Next FOMC meeting: October 27–28, 2026

Spotlight: Appraisals Are Changing

If you’re selling or refinancing, your appraisal may look different this fall. Starting November 2, conventional loans sold to Fannie Mae and Freddie Mac need the new UAD 3.6 appraisal format. Expect a longer visit, more photos and square footage reported in separate figures. None of that is a red flag, and a little preparation goes a long way.

The best preparation is a simple Home Information Folder: upgrades with dates and costs, permits and invoices, the ages of your roof, furnace and water heater, and details on solar, an ADU or outbuildings. Leave it on the kitchen counter so the appraiser doesn’t have to guess or hunt through county records. Buying? Ask your agent whether the seller has one.

My Home Appraisal Checklist for Selling or Refinancing in Washington walks you through the folder, preparing your home for the visit, and what to expect on the day.

Let’s Talk About Your Plans

If you have questions about your specific scenario, whether you’re buying, refinancing, considering a retirement mortgage, or just trying to figure out your options, I’d love to hear from you. I’m always happy to help.

Rhonda Porter, Mortgage Advisor, NMLS #121324 | Rate trends are based on the Optimal Blue index, which reflects about 35% of mortgage transactions nationwide. It is not a rate quote. Actual rates depend on credit score, loan-to-value, and other factors. This post is for informational purposes only and is not a commitment to lend.