How does an appraisal benefit mortgage lenders?

An appraisal benefits mortgage lenders primarily because it establishes the property's market value. This valuation is crucial for lenders as it determines how much they are willing to lend against the property. The appraisal provides an independent assessment of the property's worth, enabling the lender to ensure that their investment is secure and that the loan amount aligns with the current market conditions. By establishing the market value, lenders can mitigate the risk of lending more than the property is worth, which could lead to financial loss if the borrower defaults on the loan.

The other choices, while they touch on aspects related to property valuation and lending, do not directly address the primary function of an appraisal in the context of mortgage lending. For instance, estimating future property values may be influenced by an appraisal but is not the appraiser's immediate purpose. Ensuring the loan amount is adequate is also more complex than what an appraisal alone can guarantee, as it depends on additional assessments and underwriting practices. Finally, assessing the borrower's creditworthiness is entirely separate from the appraisal process, focusing instead on the borrower's financial history and ability to repay the loan.