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To put it short, yes you can refinance a mortgage without an appraisal. In fact, refinancing without an appraisal is often a much quicker process. You save money.
You don’t have to go through the hassle of taking time out of work to meet with appraisers. You don’t have to potentially get reports that your home is worth less than you initially thought.
That’s why skipping the appraisal is often warranted and wanted.
But sometimes, you want to go through with the tedious process. In the next several paragraphs, I’ll talk about home appraisals and what they mean in the refinancing world so that you can make your educated decision depending on where you are with your home and mortgage today.
Have you ever heard of fair market value? It’s the dollar amount that something is worth, whether it be your car or your house. A home appraisal will determine how much money your home is actually worth.
During an appraisal, an inspector will physically walk through your home, compare it to other properties in the area, and type up an in-depth report on your household including its value.
Thankfully, appraisals help make sure that you’re not borrowing from a mortgage lendermore than you need to borrow.
It’s highly recommended and often required to get an appraisal before any refinance, but there are ways around the process.
How Does No-Appraisal Refinancing Work?
Appraisals are almost always required, especially during the buying or refinancing processes. Why? Because primary lenders need to know how much money the home is worth to accurately charge you mortgage payments.
No banking institution or lender wants to go into a mortgage loan agreement blind, without knowing whether or not the investment is worth it.
The only way out of an appraisal is if you, the home buyer or homeowner, meet a certain set of requirements.
How Can You Refinance Your Mortgage Without an Appraisal?
If you do meet the requirements needed to skip the appraisal part of refinancing a home, a waiver may be granted.
Typically, strong refinance applicants get to request a waiver on the appraisal. Though they aren’t always granted this break, it isn’t uncommon for it to happen.
Fannie Mac and Freddie Mac, the two agencies that are in charge of these conventional loans, will make the waiving decision.
Streamline Refinance Program
VA Streamline Refinance
This type of refinance can also be called the interest rate reduction refinance loan. Oftentimes, appraisals are not needed – but there are specific circumstances where one may be requested.
To qualify for this specific refinance, you must already have a VA loan, you must currently reside in the home you’re trying to refinance, you must only request a reduction in interest rate or term, you must have made at least six consecutive payments on the loan on-time, and it must be 270 days after your final closing date on your VA loan.
Make sure you have a good reasoning and explanation for your refinance to get approved immediately, because the faster you reduce your interest rate, the less money you’ll ultimately end up spending.
FHA Streamline Refinance
This type of refinance typically does not associate itself with any appraisal requests, seeing as there’s no minimum equity amount granted.
Again, special circumstances may warrant an FHA appraisal, but it’s highly unlikely. With FHA streamline refinancing, you’ll be able to lower your annual FHA mortgage insurance premium to 0.5% of the total loan amount you have.
To qualify for this specific refinance, you have to answer yes to the following questions:
- Do you currently have an FHA loan?
- Have you waited at least 210 days since your previous mortgage closing?
- Have you waited at least 6 months between your first mortgage payment and the closing of your refinance?
- Have at least 6 payments been made on your FHA loan?
- Do you have no more than one late payment on your FHA loan in current standing?
- Do you have zero late payments on your FHA loan in the past 6 months?
Once you answer yes to all the above questions, you’ll have to confirm you will not request a cash-out refinance.
That is not allowed on FHA refinancing terms. Present a reasonable request for refinancing and you should be good to go.
USDA Streamline Refinance
This type of refinance allows you to waive or skip the appraisal option, too. However, there is a strict set of guidelines you have to follow to even qualify for such refinancing.
To qualify, you must currently have a USDA loan, you must have not made a single late payment in the past 6 months, you must have your current loan for at least 12 months before considering refinancing, meet the current debt-to-income requirements, and you must agree to only refinance your rate or term.
Why Doesn’t Streamline Refinance Require a Home Appraisal?
Streamline Refinance programs are government-backed home loans, offering one of three types of loans: FHA, VA, and USDA.
These loans were created to help borrowers save money through lower mortgage rates and affordable closing costs.
The government agencies associated with these programs do not need an appraisal to lower the interest rate. However, the lender you’re working through may still want one.
Pros and Cons of No-Appraisal Refinance
- Skipping the appraisal process will save you $300-$400
- Quicker close on your loan – appraisals usually drag the process out
- If your home has had an increase in value, you may not know the difference you’re owed
- Higher home value equals more equity, ultimately qualifying you for an even lower interest rate
Is No-Appraisal Refinance Smart?
Skipping or waiving the appraisal process will save you time if you’re in a rush to close on the property. It will also save you a few hundred dollars in the long run.
But what if your home has had an increase in value recently? That’s worth more than saving some time and money.
Realistically speaking, you just have to weigh your specific pros and cons and do what’s right for you. No appraisal can be smart, but an appraisal can also be smart.
Bottom Line: No Appraisal Refinance
Basically, an appraisal will tell you just about how much money your home is currently worth.
The worthiness of the house will depend on its location, its physical condition, and several other factors.
Most online mortgage lenderswant you to get an appraisal, or else the closing won’t go through. But some organizations don’t make it a requirement.
You will know exactly how much your home is worth without over or underpaying with an appraisal, though.