No Appraisal on Refinance Home Loans

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UPDATE: Appraisal Waivers allowed on purchases

Prior to the mortgage meltdown, lenders sometimes skipped having the appraisal process.  Rather than order an appraisal and stress about value and home repairs, Property Inspection Waivers eliminated appraisal concerns (on eligible loans).  In fact, they were like a gift from the mortgage gods!

Fast forward to October 2016 and  Property Inspection Waivers are back.  In other words, appraisals are not necessary on eligible transactions.

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Benefits of an Appraisal Waiver

In reality, an appraisal waiver is a short cut.   Appraisal waivers are a home-owners free pass!  In fact, all interested parties involved in a real estate transaction benefit.  For example, appraisal waivers:

  • Saves $450 appraisal cost
  • No low value issues
  • No property repair risks
  • Expedited loan processing

Appraisal Waiver Rules

Appraisal waivers however, are not granted without restraint.  Fannie Mae sets forth specific eligibility requirements.  As a result, not every loan scenario is granted a waiver.  For example, Fannie’s requirements include:

Fannie Mae requires borrower’s put down at least a specific amount to use the appraisal waiver.  The minimum requirements for a purchase or rate and term refinance are:

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

In addition, cash out refinances have slightly higher minimum down payment requirements:

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

Determining Property Inspection Waiver Usage

As much as you may think human underwriters wield the power, in this case they don’t.  In fact, a computer plays judge and jury when granting appraisal waivers.  DU (Desktop Underwriter) Fannie Mae’s automated underwriting system gives the green light.    in the DU findings will say whether or not the appraisal waiver is acceptable.  DU appraisal waiver + meeting eligibility requirements is the key!

UPDATE: Appraisal Waivers now allowed on purchase transactions too

By Jeremy House

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