No Appraisal for Conventional Purchase Home Loans

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Every once in a while, wouldn’t it be great to just skip the whole appraisal process?  Maybe not every loan, but a break here and there would make lending simpler.  Well, finally the time has come!  As of Sept, 2017 appraisal waivers are allowed on Conventional home loans (see below for eligible scenarios).

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What is an Appraisal Waiver?

In short, appraisal waivers are like a fast pass at Disney World!  They allow mortgage lenders to skip the appraisal on a home loan transaction.  As a result, both buyer’s and sellers benefit in a number of ways.  For example:

  • Buyer saves $450 (est) appraisal cost
  • No risk of low value issues
  • No risk of property repairs
  • Expedited loan processing (appraisals take 1 week est)

Fannie Mae Release on Appraisal Waivers for Purchases
Freddie Mac Release on Appraisal Waivers for Purchases

Which Home Loans Get Appraisal Waivers?

Both Conventional purchase and refinance home loans allow appraisal waivers. In addition, VA Streamline Refinances and FHA Streamline Refinances allow lenders to skip the appraisal as well.  While Conventional home loans have decided to allow appraisal waivers, the flood gates have not burst open wide.

In fact, several eligibility criteria must be met before an appraisal waiver is allowed.  For example, buyers must put a specific minimum down payment down to be eligible for an appraisal waiver.

Minimum Down Payment Requirements

Purchases and No Cash Out Refinances

  • Primary Residence 10%
  • Vacation Home 10%
  • Investment Property 25%

Cash Out Refinances

  • Primary Residence 30%
  • Vacation Home 40%
  • Investment Property 40%

In order to confirm appraisal waiver eligibility, lenders defer to various automated underwriting systems.  As a result, appraisal waiver eligibility is determined after your loan officer reviews the automated findings.

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Appraisal Waiver Eligibility

Appraisal Waiver eligibility is a very complex determination.  Lenders depend on automated underwriting systems to determine appraisal waiver eligibility.  In order to do this, the automated underwriting systems consider countless factors.  For example:

  • Property characteristics
  • Down payment
  • Borrows credit
  • Borrower’s occupancy of subject property

Lenders determine Appraisal Waiver eligibility after a borrower is under contract.  Therefore, buyers should always expect and appraisal is required.  As a result, appraisal waivers should be viewed as a bonus!

By Jeremy House


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