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Do I need an appraisal to refinance my home?

Gina Pogol
The Mortgage Reports contributor

How to refinance without an appraisal

Appraisals are expensive and can put your refinance at risk if the appraiser gives you a low value.

The best option: skip the appraisal entirely.

Fortunately, that possibility is becoming more likely by the day, as agencies like Fannie Mae and Freddie Mac loosen refinance rules.

And, government programs like FHA, USDA, and VA all offer appraisal-free options.

Ready to get started on your sans-appraisal refinance? Let’s take a closer look.

Check your eligibility for an appraisal waiver with a top lender. Start here. (Jun 16th, 2019)

In this article:

Do you need a home appraisal to refinance your mortgage? Not necessarily.

  • Many mortgage lenders use an automated valuation model (AVM) to estimate property values. If you have a lot of equity in your home, you may be able to avoid an appraisal and its cost
  • If you refinance an FHA, VA or USDA mortgage with the same kind of loan, you probably won’t need an appraisal
  • Automated underwriting systems, like Fannie Mae’s Desktop Underwriter, may grant appraisal waivers

You’ll have the best chances at receiving an appraisal waiver if you are not taking cash out of your home when refinancing.

Appraisal waivers: What are they and how do you get one?

Fannie Mae’s established guidelines don’t tell you for sure if you’ll be an appraisal waiver recipient.

But the stronger your application (income, credit score, and equity), the better your chances. Here are the guidelines:

Fannie Mae considers appraisal waivers for the following:

  • 1-unit properties, including condominiums
  • Limited cash-out refinance transactions for primary residences and second homes up to 90 percent loan-to-value (LTV)  or investment properties up to 75 percent LTV
  • For cash-out refinancing, primary residences may get appraisal waivers with LTVs of 70 percent or under, second homes and investment properties are limited to 60 percent

Related: What is a home appraisal, and why do I need one?

The following are not eligible for an appraisal waiver offer:

  • Properties located in a disaster-impacted area
  • Construction and construction-to-permanent loans
  • Two- to four-unit properties
  • Value of the property is $1,000,000 or greater
  • HomeStyle® mortgage products (Renovation and Energy)
  • Texas 50(a)6 loans
  • Leasehold properties, community land trust homes, or other properties with resale restrictions
  • Cooperative units and manufactured homes
  • DU (Fannie Mae’s underwriting software) loan case files that receive an ineligible recommendation
  • Loans for which the mortgage insurance provider requires an appraisal
  • Loans using the subject property’s rental income to qualify

Streamline refinances with and without appraisals

Government-backed loans like FHA, VA and USDA mortgages have their own rules about whether you need to order an appraisal to refinance.

You generally won’t need an appraisal if you get an FHA-to-FHA, VA-to-VA, or USDA-to-USDA no-cash-out refinance.

Related: How can I avoid a home appraisal when I apply for a mortgage?

Think of it the way the government does: it’s already on the hook if you default on your home loan. So if refinancing can put you in a better financial position, the government is less likely to end up with a default on its hands.

Because of this, you’ll only be eligible for a streamline refinance without re-qualifying if refinancing results in a “net tangible benefit” to you. In plain English, your lender applies certain formulas to your application and determines if refinancing will leave you better off — with a lower payment, interest rate, or better terms than before.

FHA streamline refinance

To refinance an FHA mortgage without an appraisal, you must apply and be approved for an FHA streamline.

You must be current (not delinquent) on your mortgage now and at least 6 months must have passed since you received your loan.

Start your FHA streamline loan approval here. (Jun 16th, 2019)

VA streamline IRRRL (Interest Rate Reduction Refinance Loan)

The VA IRRRL mortgage is for homeowners who have a VA loan currently and want to drop their rate. The program does not require proof of income or assets — and does not require an appraisal.

It’s the easiest refinance available in today’s market.

USDA streamline refinance

The USDA rolled out its streamline refinance program nationwide a few years ago. It has its own rules as well, slightly different from those of FHA or VA streamlines. The only program allowable is a 30-year fixed mortgage. You must see a payment reduction of at least $50 month to be eligible to refinance.

The program allows zero cash out, and the property must still be your primary residence. If the property was in a designated rural area when you took out your original USDA loan, you can still complete a streamline USDA refinance, even if the area does not meet the “rural” definition today.

Refinance when it makes sense, even if you need an appraisal

If refinancing your mortgage will solve a problem for you, it may be worth the expense of an appraisal. For instance, if your value has risen to the point that you’d be able to drop your mortgage insurance by refinancing, you should probably do it. You may recoup the cost of an appraisal in just a few mortgage-insurance-free months.

Related: How can I cancel FHA mortgage insurance?

You’ll also probably need an appraisal to pull cash out of your home and make use of its equity. Because home equity financing, whether it’s a cash-out refinance, a line of credit (HELOC) or a home equity loan is some of the cheapest money available, the cost of an appraisal may not be much of a factor.

Check your refinance eligibility

If you want to see if Fannie Mae or Freddie Mac will offer you an appraisal waiver, you need to apply with a lender. The application takes just a few minutes and there’s never any obligation to proceed.

The link below will take you to a questionnaire that will match you with the right lender.

Verify your new rate (Jun 16th, 2019)