What to Do When Your Appraisal Comes in Low on a Refinance

A low appraisal on a refinance is one of those moments that can feel like the whole transaction is falling apart. I just worked through this with a borrower on an FHA refinance — the appraisal came in below what we needed, and we had to decide quickly how to respond. We got through it, and the experience is a good reminder that a low appraisal is not necessarily the end of the road.

Here’s what your options actually look like when this happens.

Why Appraisals Matter on a Refinance

On a purchase transaction, the appraisal protects the lender from overpaying for collateral. On a refinance, it determines your loan-to-value ratio (LTV) — the relationship between what you owe and what the home is worth. LTV affects everything: whether you qualify at all, what programs you’re eligible for, whether you’ll need mortgage insurance, and what your rate will be.

If the appraised value comes in lower than expected, your LTV is higher than planned — and that can push you outside the guidelines for your loan program or change the economics of the refinance significantly.

Option 1: Request a Reconsideration of Value

This was the first move we made on the FHA refi I mentioned, and it worked.

A reconsideration of value (ROV) is a formal request to the appraiser — submitted through your lender — asking them to reconsider their valuation based on additional information. The most common basis for an ROV is providing comparable sales (comps) that the appraiser may not have used or been aware of that support a higher value.

A few things to understand about the ROV process:

• It goes through the lender, not directly to the appraiser. Due to appraiser independence requirements, you cannot contact the appraiser directly. Your loan officer submits the request on your behalf.
• You need to bring specific evidence. Saying “I think my home is worth more” isn’t enough. You need to identify specific comparable sales — ideally closed sales within the last 90 days, within a mile of the property, with similar square footage and features — that support a higher value.
• The appraiser is not obligated to change the value. If they review the comps and stand by their original conclusion, the value stands. But it’s always worth attempting before assuming the number is final.
• For FHA loans, there is a formal ROV process. FHA has specific guidelines for how reconsiderations of value are handled, and lenders are required to follow them. This gives the process more structure than a conventional ROV.

In our case, the borrower did the legwork — they identified additional comps that genuinely supported a higher value, we submitted the ROV, and the appraiser revised the value upward. Transaction back on track.

Option 2: Restructure the Loan Around the Appraised Value

While we were waiting to hear back on the ROV, we didn’t just sit on our hands. We ran the numbers on a backup plan: restructuring the refinance based on the original appraised value.

This means adjusting the loan amount downward to fit within the LTV requirements of the program using the lower value. Depending on how far off the appraisal was, this might mean:

• Bringing cash to closing to reduce the loan balance to an acceptable LTV
• Reducing the loan amount to eliminate the cash-out component if it was a cash-out refinance
• Switching from a cash-out refinance to a rate-and-term refinance, which has more favorable LTV limits
• Accepting a higher LTV with mortgage insurance if the program allows it

Not every restructure works for every borrower — it depends on how much equity is at stake and what the goal of the refinance was in the first place. But having a backup plan modeled before the ROV decision comes back puts you in a much stronger position. You’re not scrambling; you’re choosing.

Option 3: Get a Second Appraisal

In some circumstances, a second appraisal is possible — though it’s not always allowed depending on the loan program and lender guidelines. On conventional loans, Fannie Mae and Freddie Mac have specific rules about when a second appraisal can be ordered. On FHA loans, once an appraisal is completed and attached to a case number, it stays with that case number for 120 days — you generally cannot simply order a new one to get a different value.

If you believe the appraisal was fundamentally flawed — not just lower than hoped, but containing factual errors, incorrect square footage, wrong bedroom count, or inappropriate comps — that’s a stronger basis for escalating beyond a standard ROV. Talk to your loan officer about what options exist within your specific program.

Option 4: Wait and Revisit

If the property is in an appreciating market and the timeline isn’t urgent, sometimes the right answer is to wait. Values move, and a refinance that doesn’t pencil out today may make sense in six to twelve months with a fresh appraisal. This is obviously not a solution if your refinance goal is immediate — reducing a high rate, eliminating mortgage insurance, or accessing equity for a pressing need — but it’s worth naming as a legitimate option.

What Not to Do

A few things that don’t help and can make the situation worse:

• Don’t contact the appraiser directly. It’s not allowed to discuss the value or to dispute the appraisal directly with the appraiser. This is why there is a Reconsideration of Value process that may take place in the event of a lower value from the appraiser.
• Don’t assume the value is negotiable like a purchase price. An appraisal is an opinion of market value based on evidence. Pressure and frustration aren’t evidence.
• Don’t make major changes to the property mid-transaction hoping to influence a revised value — improvements made after the appraisal date generally can’t be considered in an ROV.

The Bottom Line

A low appraisal on a refinance is a setback, not necessarily a dead end. In my experience, the borrowers who get through it are the ones who stay calm, gather good information, and work with their loan officer on a clear plan — whether that’s a reconsideration of value, a restructured loan, or a combination of both.

If you’re dealing with a low appraisal on a refinance in Washington State, let’s talk through your options. And if you’re still in the planning stages, you can learn more about refinance programs available to Washington homeowners on my Refinance Programs page or the Washington State Mortgage Refinance Guide.