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There is no fixed cash amount: an appraisal gap is the difference between your contract price and the lower appraised value, but the extra cash you need depends on the loan amount your lender will approve, your planned down payment, any price change you negotiate, and closing costs. Ask your lender to recalculate your loan and cash to close using the appraised value before deciding whether to proceed.
What an appraisal gap means
If you agree to buy a home for more than its appraised value, the difference is the appraisal gap. The appraisal is relevant to the lender’s collateral decision, and a lower valuation can affect how much the lender approves. The gap itself does not automatically equal the additional cash you must bring.
Fannie Mae explains that if a loan is not approved at the full requested amount because of a lower appraisal, the buyer must decide how to proceed: Fannie Mae’s guide to understanding home appraisals. Freddie Mac likewise notes that a low appraisal can affect financing and may require the buyer to pay more up front: Freddie Mac’s guide to low appraisals.
How to estimate the cash you need
Start by identifying the gap, then get the lender’s updated figures. The lender’s loan rules, the appraised value, your borrower and loan circumstances, and any negotiated price change determine the proceeds and cash needed; there is no universal loan-to-value percentage or standard gap amount to apply.
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- Calculate the gap. Subtract the appraised value from the contract purchase price. For example, if the contract price is $500,000 and the appraisal is $480,000, the gap is $20,000.
- Ask your lender to recalculate the loan. Request the approved mortgage amount and updated cash-to-close figure using the appraisal and your specific loan terms. Do not assume the lender will lend a fixed percentage of the appraised value.
- Compare cash to close with your budget. Account for the down payment and other funds you had already planned to bring, as well as closing costs. The lender’s revised cash-to-close calculation—not the gap alone—shows the amount you need to fund.
- Recalculate if the price changes. If the seller agrees to a lower purchase price, ask for an updated loan and cash-to-close calculation based on the amended contract price.
Options after a low appraisal
Negotiate a lower purchase price
You can share the appraisal and relevant comparable-sale information with the seller and ask to reduce the price. A price adjustment may reduce the amount you need to finance or pay, but the seller does not have to agree.
Request a reconsideration of value
If the appraisal has a material error, omission, or other substantive issue, raise it through your lender and provide supporting information. Under Fannie Mae’s appraisal quality guidance, a request to change the value must be based on material and substantive issues; it cannot be based solely on the fact that the value does not support the proposed loan amount. A reconsideration request does not guarantee a different value.
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Bring more cash or change your down payment
If the seller will not lower the price and you still want to buy, you may choose to contribute more cash toward the purchase. Ask the lender to show how any increased buyer contribution affects the loan and final cash-to-close amount, then decide whether the revised amount fits your budget.
Check whether your contract allows cancellation
Freddie Mac identifies cancellation under an appraisal contingency as a possible response to a low appraisal. That does not establish a universal right to cancel: the signed contract’s language, deadlines, and applicable circumstances control. Review those terms promptly with your real-estate professional.
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- The lender’s revised loan amount and cash-to-close figure.
- Whether the seller is willing to adjust the purchase price.
- Whether any appraisal concern is supported by specific, material evidence.
- Your contract’s appraisal-contingency terms, deadlines, and consequences.
- Whether proceeding still fits your available cash and overall budget.
For most loans, Fannie Mae says the lender is responsible for ensuring the property provides adequate collateral and obtains a complete appraisal that accurately reflects market value, condition, and marketability. Some eligible loans may use a value-acceptance option instead. See Fannie Mae’s appraisal requirements. Your lender can explain how the valuation affects your financing; your real-estate professional can help interpret the contract options.
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