Question about home value on FAFSA

cocoa'smom · 01-24-2007, 11:59 AM

Hi - I'm just starting to fill out the FAFSA forms and I have a stomach ache! I have a questions about home values. How do you figure out the value of a home. Do I take the figure from our tax appraisal? Our primary home would probably sell for $300,000+. Our tax appraisal value is $240,000. We have a mortgage of around $200,000. Would I put the value of the home at $40,000? Also, what about home equity loans? Can I include the amount of the home equity loan along with the mortgage amount?

Chedva · 01-24-2007, 12:51 PM

The value of the home, I believe, is the market value - what are you likely to be able to sell it for? (Since this is a wishy-washy number, you may want to lowball it a bit, although it is often higher than appraisal unless your community does 100% assessments.) Then the equity in your home is determined by value minus the remaining mortgage balance and anything you owe on the home equity. I believe FAFSA asks for both, although I may be remembering incorrectly.

cptofthehouse · 01-24-2007, 01:04 PM

When looking at the value that you use for your home, it is checked against a govt indicator. See http://finaid.org/calculators/federalhousing.phtml. IF you are lower than what they come up with through this method, you will either get corrected or contacted. If you are above that number, well, your figure stands. So if you are in an area where housing is not a mover and just has not appreciated much, you need to have your number covered by some facts, such as a market value assesment, or other official info that can show that you are not in the same ball game that federal indicators show. My mother in law would be so in the gravy if she could sell that wreck of a house where she lives in a town where real estate is cheap and appreciation very slow for the number those indicators give. We, on the other hand, live in an area where those numbers are generous considering the appreciation in the last several years here. Anyone who bought a decent home in this area can make out. The problem is finding anything to move into around here that makes selling worth while.

cocoa'smom · 01-24-2007, 01:21 PM

Thanks, cptofthehouse, that link was very helpful....but it brings up a few more questions. 1) It says for our primary home, the adjusted minimum derived value (adding 10%) is $261,000. Our mortgage and home equity is approx $260,000....so, would it be bad to put the value of our home at $1,000? 2) We have a vacation home - we purchased for $125,000 in 1995, tore it down, built a new home - currently have loan of $350,000. Since it is in a desirable lake community, the home could easily sell for over $1 million. The adjusted minimum derived value on the link says $600,000. Would it be OK to put $600,000? We just got lucky and bought at a time before the prices went up - we are by no means millionaires. Thanks for your help!!

sblake7 · 01-24-2007, 01:26 PM

FAFSA doesn't ask for home value (on your primary residence).

Chedva · 01-24-2007, 01:51 PM

As I understand it, the "value" of your home is $260,000. The "equity" in your home is $1,000. Yes, it is bad if you put $1,000.

Same for your vacation home - if it shows the value as $600,000, that's what you should put in, not the value less your construction loan.

somemom · 01-24-2007, 03:23 PM

On the 1st home, you do not enter it on FAFSA. For the 2nd home, I think you enter the net value- the equity in the home at market value.

thumper1 · 01-24-2007, 05:30 PM

FAFSA does NOT ask for home value for your primary residence. It only asks for second homes and other real estate (rental investments for example). And home equity is not part of the FAFSA EFC calculation. Home equity and value ARE used on the PROFILE.

cptofthehouse · 01-24-2007, 08:04 PM

Absolutetly right! FAFSFA does NOT ask for primary residence values, but PROFILE and other aid apps may.

As for the value of a vacation home that has sky rocketed in value, that is not something I would be comfortable giving advice about. I know around here, many folks use the formula given when it is truly understating value for this area (for PROFILE home values) but how it would hold up if challenged is a whold different story. The conservative answer is to use what is a true market value, but in most cases you cannot get that answer without going through an appraisal. I believe that this is kept vague deliberately, since there is no reason why a standard method cannot be prescribed. You need to ask someone who is knowledgeable about financial aid forms. Perhaps contact the FAFSA help line and ask if the that federal calculator is adequate or if you have to go farther.