Getting approved for a mortgage refinance with no appraisal can save you time and money. One of the biggest blessings for homeowners is when they can find a mortgage refinance without an appraisal being required. Yes, it not available to everyone in every situation, but it is possible to refinance with no appraisal if you know where to look.
Getting an appraisal when you refinance your mortgage is not just a pain and a $400 to $500 cost. If your appraisal comes in too low, you may not be able to refinance your mortgage at all. All of that time and expense you put in to tidy up in the interior and exterior of the home could all be for naught.
Finding a Home Refinance with No Appraisal Required Saves You Money and Automates the Process in Many Ways.
Having a home not appraise was a major problem in the mortgage meltdown of 2008 and 2009. As homes lost value – a total of $6 trillion in home equity was lost in the US from 2006-2010 – many people owed more than their homes were worth.
They had no equity, and often negative equity. This meant that many people were foreclosed upon and had to rent a home or apartment.
The US government wants to avoid this scenario as much as possible, so there are now ways for people to get a refinance easier. This means being able to refinance without getting an appraisal.
Below are two of the best ways to refinance without an appraisal. These should work for many homeowners, unless you have a jumbo loan above $417,000:
#1 Government-Backed Financing
If you have a government backed loan, such as FHA, VA and USDA, you often can get a streamline refinance through the government agency. This is also called an interest rate reduction refinancing loan. The appraisal requirements and rules vary depending upon which loan you have, but they all three have these things in common:
- You should be able to use your old appraisal to qualify for your government home loan.
- You can include your closing costs in the new loan, but may not pull out equity even if you have it.
- The refinance has to leave you in a stronger financial position. This means you either need to be reducing your monthly payment, moving you into a shorter-term loan, or going from an ARM loan to a fixed rate loan.
- Lenders may impose some underwriting requirements, such as a credit score review, but the lending standards are usually relaxed.
If you have a government loan you cannot beat the streamline refinance program. This program has allowed millions of homeowners in trouble on their mortgages to refinance into a lower rate. It does not allow you to pull out cash, but just being able to have a lower payment each month can make all the difference in the world to many people. Check the VA home loan requirements and the FHA loan requirements so you know what you need before they ask you for it.
Note that you need to be current on your payments; you generally cannot have had any late payments in the last 12 months.
#2 Fannie Mae and Freddie Mac Mortgages
If you do not have an FHA, VA or USDA loan, there is a good chance that your mortgage is insured by Fannie Mae or Freddie Mac. The Home Affordable Refinance Program or HARP allows you to refinance no matter what you owe on your home. This is another reason that this no appraisal refinance mortgage program has been so popular over the last few years.
The only requirement on your current loan is that you did not make any late payments in the last six months. As long as you took out your loan before June 2009, you should be able to refinance with HARP without a new appraisal. In the past most no appraisal programs do not allow a refinance and cash out.
A no appraisal refinance loan from Fannie or Freddie also means that you will not have difficulty qualifying. In many instances, these limited-time programs allow borrowers to get a 100% mortgage without an appraisal because Loan to Value is not the driving factor to qualify.
Most of these loans come with very relaxed credit standards. It benefits the US government to help to rescue as many homeowners in trouble on these mortgages as is feasible. After all, the US government needs to pay back lenders if the buyer defaults, so this helps all parties.
Why No Appraisal Refinance May Be the Best Option?
There are many benefits to refinancing without an appraisal. First, as noted earlier, if owe more on your home than it is worth, refinancing in a traditional sense is often off the table.
Second, you will not need to spend the time and money to get an appraisal. Many people who need to refinance are in trouble and need to cut their expenses. You can save at least $400 and several weeks of your time by not having an appraisal done.
Also, not having an appraisal means a faster closing process. There are situations where the closing takes longer than anticipated, and a new appraisal has to be ordered, which adds more time and expense.
Most people who refinance with conventional lenders will need to order a new appraisal. This is often fine, but it can become a problem if home prices are declining in a down market. In that case, many people cannot refinance, cannot save on their monthly payments, and could be in danger of losing their homes.
Top No Appraisal Refinance Mortgage Options
- Streamline Refinance Programs: Some government-backed and conventional loan programs offer streamlined refinancing options that typically do not require a new appraisal. These programs are designed to simplify the refinance process, making it quicker and more accessible for homeowners. Two of the most common streamlined refinance programs are:
– FHA Streamline Refinance: If you have an existing FHA loan, you may be eligible for an FHA Streamline loan. This program usually does not require an appraisal or extensive credit documentation. It’s designed to help FHA borrowers lower their interest rates and monthly payments.
– VA Interest Rate Reduction Refinance Loan (IRRRL): For eligible veterans with existing VA loans, the VA IRRRL, also known as the VA Streamline Refinance, is available. Like the FHA Streamline, it typically does not require an appraisal, extensive credit checks, or income verification.
- Conventional Loan Options: If you have a conventional mortgage, you may still be able to refinance without an appraisal under certain conditions:
– Good Credit Scores: If you have good or excellent credit with high fico score (700 or higher for Experian, Trans Union and Equifax) and a stellar credit history, some mortgage brokers and lenders may offer “appraisal waivers” for home refinancing with conventional refinance programs like Fannie Mae or Freddie Mac. These lending waivers rely on automated underwriting systems to determine home values without a physical appraisal.
– Loan-to-Value Ratio (LTV): If your loan-to-value ratio is low, some mortgage lenders, credit unions or banks may consider waiving the appraisal requirement. For example, let’s say you live in a home that is worth $850,000 and you only owe $500,000 then the lender may approve a no appraisal mortgage refinance.
- HARP (Home Affordable Refinance Program): The HARP program officially ended in 2018, some homeowners may still be eligible for this unique program, which did not always require a new appraisal. HARP was created to help homeowners with Fannie Mae or Freddie Mac backed liens who owed more on their mortgage than their property value to refinance. If you were previously eligible for HARP but didn’t refinance, ask your lenders if you meet the eligibility requirements for a similar program.
- Lender-Specific Programs: Some lenders offer their own refinance programs that do not require appraisals. These programs vary widely, and eligibility depends on the lender’s specific criteria, so it’s worth exploring your options with different lenders.
- Consider an FHA or Veteran Cash-Out Refinance: While FHA and VA streamline refinances do not require appraisals, if you’re open to the idea of a cash-out refinance, you might find it easier to qualify without an appraisal. In a cash-out refinance, you borrow more than you owe on your current mortgage, and the additional funds can be used for various purposes. VA and FHA cash-out refinance programs have their own requirements, so be sure to explore these options with your lender.
- Contact Multiple Lenders: Mortgage programs and lender policies can change over time, so it’s advisable to contact multiple lenders and discuss your specific situation. Each lender may have its own guidelines and potential options for refinancing without an appraisal.
- Raise Your Credit Scores and Increase Your Home Value: If you’re not currently eligible for a no-appraisal refinance, consider working on improving your credit score and increasing your home’s value. These efforts can make you eligible for more favorable refinance terms and potentially waive the appraisal requirement in the future.
- Home Equity Loan with No Appraisal: There are still a few lending companies that offer a HELOC or home equity loans with a stated value or a statistical appraisal. Ask about the possibility of getting a HELOC with no appraisal.
With the above programs we outlined, you can often secure a home refinance without an appraisal as long as you are current on your payments. You also will need to not have had any late payments in the recent past.
Being able to qualify for a mortgage refinance without an appraisal means many more people can refinance and stay in their homes. It also means that they can save substantially on their monthly payments.
Obtaining a no-appraisal refinance involves several considerations, particularly regarding the valuation of your home, a crucial aspect for any mortgage transaction, whether for purchase or refinancing. Lenders rely on home value assessments to ensure the safety of their investment, often through third-party appraisals.
Typically, an appraisal is a requisite step in the refinancing process. However, under certain circumstances, it may be possible to bypass this requirement.
Here are three popular methods for refinancing without an appraisal:
Appraisal waiver: Fannie Mae and Freddie Mac, the entities overseeing conventional home loans, may permit lenders to forgo appraisals for refinancing applicants with robust financial profiles.
Streamline Refi programs: Government-backed loans such as FHA, VA, and USDA offer Streamline Refinances, aimed at reducing mortgage rates without incurring significant upfront costs. Although these government agencies do not mandate appraisals, individual lenders may still require them.
Automated Valuation Model (AVM): For borrowers with established home loans or substantial down payments, an AVM can assess whether there’s adequate equity for a no-appraisal refinance, thus eliminating the need for a traditional appraisal and the associated expenses and complexities.
Refinancing a mortgage without an appraisal is possible through certain mortgage programs and under specific circumstances. Here’s how you can pursue a mortgage refinance without the need for a new home appraisal:
In summary, mortgage refinancing without an appraisal is possible through government-backed streamline programs, specific lender offerings, or in cases where high credit scores and low LTV ratios apply. Always consult with lenders, compare offers, and carefully review the terms of any refinance program to ensure it aligns with your financial goals and needs.
About RefiGuide
Bryan Dornan is a financial journalist and currently serves as Chief Editor of RefiGuide.org. Bryan has founded several mortgage and marketing companies and has worked as a loan officer and mortgage broker in the industry for over 25 years and has a wealth of experience in providing mortgage clients with the highest level of service in the industry. Bryan's continual focus is to promote affordable home-ownership to consumers like you across the United States. He also writes for RealtyTimes, Patch, Buzzfeed, Medium and other national publications. Find him on Twitter, Muckrack, and Linkedin
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