What you'll need
- Contract price and appraised value
- Planned down payment
- Loan type (conventional or FHA)
- Earnest money and any appraisal-gap clause
What you'll get
- Extra cash to close — For paying the gap
- Four options side by side — Pay, renegotiate, split, borrow more
- New LTV and PMI or MIP — From published rate cards
- Earnest money at risk — If you walk away
How the calculator works out the cash
The lender divides your loan by the lower of the contract price and the appraisal. Fannie Mae's Selling Guide says so for conventional loans, and HUD's FHA handbook says so for FHA. You still owe the seller the contract price, so whatever the lender will not lend comes from your cash.
lender value = lower of price and appraisal
loan = lender value × (1 − your down-payment %), capped at your lender's maximum LTV
cash to close = price − loan · extra cash = that − your planned cash
Worked example: a $20,000 gap on a conventional loan
These are the calculator's default inputs, so you can check every number: $400,000 contract, $380,000 appraisal, $40,000 (10%) down, conventional, 720–739 credit score, 30-year loan.
- As planned: $360,000 loan, $40,000 cash, 90.00% LTV, PMI $138.00 a month.
- Pay the gap: 90% × $380,000 = $342,000 loan. Cash = $400,000 − $342,000 = $58,000, which is $18,000 more than planned. PMI falls to $131.10 because the loan is smaller.
- Seller drops to $380,000: cash $38,000, $2,000 less than planned.
- Split it 50/50: the price becomes $390,000, the loan stays $342,000, cash $48,000 ($8,000 more).
- Keep your $40,000 and borrow more: $360,000 ÷ $380,000 = 94.74% LTV. No extra cash, but PMI rises to $198.00 a month, $60.00 more.
A harder case: FHA at the minimum down payment. $300,000 contract, $285,000 appraisal, 3.5% down. FHA's cap is 96.5% of the lower value, so the loan can be at most $275,025. Keeping the planned $289,500 loan would be 101.58% of the appraisal, which FHA does not allow. There is no borrow-more option: paying the gap takes $14,475 more cash, and only a lower price reduces it.
What this calculator leaves out
- Closing costs. They come on top and barely change between options. Use the closing costs calculator.
- Whether you can afford the higher payment. Check that with the mortgage affordability calculator.
- How to challenge the value and what each option involves. That is in the appraisal gap guide, including reconsideration of value and the FHA and VA rules.
- PMI over time. The PMI calculator shows when it drops off.
Methodology and sources
- Lower-of rule, conventional: Fannie Mae Selling Guide B2-1.2-01, Loan-to-Value (LTV) Ratios (06/01/2022; Guide published Oct. 7, 2026): “The property value is the lower of the sales price or the current appraised value.” https://selling-guide.fanniemae.com/sel/b2-1.2-01/loan-value-ltv-ratios Read 2026-10-30.
- Lower-of rule and 96.5% cap, FHA: HUD Handbook 4000.1, Update 18 (issued Aug. 12, 2026), Glossary: Adjusted Value; II.A.2.b.ii, p. 179. https://www.hud.gov/sites/default/files/Housing/documents/40001-hsgh-Update-18.pdf Read 2026-10-30.
- Conventional maximum LTV: your input (default 97%, labelled an example). Fannie Mae publishes its limits in the Eligibility Matrix, which returned an access error when we tried it on 2026-10-30.
- PMI: National MI (National Mortgage Insurance Corporation), Monthly Advantage BPMI rate card, primary residence, fixed rate, card MA.MN.BP.2022-03, effective 2022-03-01, read 2026-09-29; the same rate card the site's PMI calculator uses. Charged only above 80% LTV. Your lender's insurer may quote differently.
- FHA annual MIP: HUD Mortgagee Letter 2023-05 (annual MIP, effective March 20, 2023), read 2026-09-30. The 1.75% upfront premium is usually financed, so it changes neither cash to close nor the base-loan LTV and is left out.
- Every option keeps your planned down payment as a percentage of the contract price, except “borrow more”, which keeps the dollars. Not modelled: seller credits, second loans, VA loans, and a lender's own overlays.
Frequently asked questions
How much extra cash do I need if the appraisal comes in $20,000 low?
Usually less than $20,000 if you keep the same down-payment percentage. On a $400,000 contract that appraises at $380,000 with 10% down, the lender lends 90% of $380,000, or $342,000. Cash to close rises from $40,000 to $58,000, an extra $18,000: the $20,000 gap minus the $2,000 smaller down payment on the lower value.
Why does the lender use the appraisal instead of the price?
For a purchase, Fannie Mae's Selling Guide (B2-1.2-01) defines the property value as the lower of the sales price or the current appraised value. FHA does the same: HUD Handbook 4000.1 (Update 18) uses the lesser of the purchase price and the property value, and caps the loan at 96.5% of it.
Can I keep my down payment the same and just borrow more?
Sometimes, on a conventional loan. Keeping a $360,000 loan against a $380,000 appraisal raises the loan-to-value ratio from 90.00% to 94.74%, and PMI from $138 to $198 a month at a 720–739 score. On an FHA loan at the 3.5% minimum it is not possible: the loan is already at the 96.5% cap, so a $15,000 gap on a $300,000 home needs $14,475 more cash.
Does an appraisal-gap clause mean I pay the whole gap?
Only up to the amount written in the clause. Enter it in the calculator: it shows how much of this gap you are committed to and how much is left to negotiate. The cash figures for each option already include whatever you pay.
Does this include closing costs?
No. Cash to close here is the price minus the loan, the part that changes with the appraisal. Lender, title and escrow costs come on top and are about the same under every option; price them with the closing costs calculator.