What happens mechanically if the appraisal is low and I don't have an appraisal gap?

What happens if my appraisal is low without gap coverage?

You're asking what happens when the appraisal comes back lower than the sale price and your purchase contract doesn't include an appraisal gap clause to cover the difference.

When the appraisal is low without gap coverage, your lender can only approve a loan based on the appraised value, not the sale price. If you agreed to pay $400,000 but the home appraises for $380,000, the lender treats the home's value as $380,000 for loan calculations. This creates a funding shortfall—the difference between what the lender will fund and what you owe the seller.

You can check your purchase contract to see if any appraisal protection exists, and review your loan terms to understand exactly how much the lender will fund based on the new appraised value. Your down payment percentage stays the same, but it's calculated from the lower appraised amount.

Common paths include negotiating with the seller to lower the sale price to match the appraisal, bringing additional cash to cover the gap, or walking away from the purchase if your contract includes an appraisal contingency. Share the appraisal results with your lender and they can walk you through how the new loan amount affects your closing requirements.