Sales Price versus Appraised Price

The sales price you agree upon IS NOT the amount your mortgage is based on.
This fact has caused many financing problems in a "seller's market" as exists right now. The mortgage lender will order an appraisal by a certified appraiser. The appraised value will often be less than the sales price. This does NOT necessarily mean you are overpaying. Hopefully your realtor or attorney has helped you negotiate a fair price for your home. What this DOES mean is that you may need more cash at your closing than you originally anticipated.

As an example: You signed a contract to purchase a home for $500,000. You have $100,000 to put down and plan on financing the remaining 80% ($400,000.) As the loan process progresses the appraisal report shows the value as $475,000. Your 80% loan is now $380,000 and you are "short" $20,000!