Updated: Jul 14
Due to lower interest rates, I recently refinanced my home. In doing so, my mortgage lender stated that Fannie Mae and Freddie Mac was going to grant me an appraisal waiver. This appraisal waiver meant that I could save around $600 by not needing an appraisal on the home. Instead of paying an appraisal fee, the lender is able to establish the homes estimated value using recent sales in the nearby area. These appraisal waivers are gaining traction due to the current pandemic and making refinancing easier and cheaper than ever before. This appraisal waiver is actually becoming encouraged by Fannie Mae and Freddie Mac although lenders can still require them. These appraisal waivers are considered safer to the homeowner and appraiser themselves due to not having to physically enter the homes. It has become common on standardized refinances since they are considered safer since the home owner has already been paying their mortgage and isn't changing their loan balance. If you however are completing a new purchase or a cash out refinance these are considered riskier and won't likely gain an appraisal waiver. Appraisal waivers are a great way to help save money and expedite the lending process. Hopefully, if these loans stay solvent this practice will continue long after the pandemic!
What is a home appraisal?
When you apply for a mortgage loan, the lender needs to identify the value of the subject property. This is used to calculate how much loan you can qualify for. If the home purchase price exceeds the appraised value, the purchaser will need to come up with cash to exceed that price or go back to the seller and negotiate a lower price.
What are appraisal waiver Requirements?
In order to qualify for an appraisal waiver you must have a loan to value that doesn't exceed 80%. The property must also only have a single unit.
Can you get an appraisal waiver on a cash out refinance?
You cannot currently get an appraisal waiver on a cash out refinance. These types of loans are considered riskier and need to have an appraiser to verify the value of the property.
Are there cases where you still want to get an appraisal done?
Appraisals can be a great idea to get on a purchased property. When purchasing a property it can be important to have an independent professional confirm their estimated value of the property. Doing so can even save you on a negotiation when utilizing an appraisal contingency. If the appraisal comes in under your bid, you can than negotiate a lower price or walk away from the deal.