Can you refinance without an expert opinion?
Expert opinions are expensive and time-consuming. You can even put your refinance at risk if the appraiser gives you a low score.
The best option? Skip the review entirely.
Fortunately, this possibility becomes more likely as agencies like Fannie Mae and Freddie Mac relax the refinancing rules. And government programs like FHA, USDA, and VA all offer rating-free options.
Are you ready to start your refinance without a rating? Let's take a closer look.
Check your eligibility for an expertise waiver with a top lender. Start here (09/24/2021)
In this article (continue to …)
How to get refinance with no rating
The value of your home is a key variable in any mortgage loan, whether you are buying it or refinancing it. Lenders need to know how much your home is worth so they know they are making a safe investment. And this is where a third-party appraisal comes into play.
An expert opinion is almost always required. However, if you meet certain requirements, you may be able to skip this part of the process.
Here are three ways to refinance without an expert opinion:
A waiver of an opinion: Fannie Mae and Freddie Mac, the agencies that regulate conventional lending, can allow lenders to forego ratings for stronger refinance applicantsA Streamline Refinancing Program: State-backed loans like FHA, VA, and USDA offer streamline refinancing. These loans are designed to save you money by lowering your mortgage rate without incurring many upfront closing costs. The government agencies that support these loans do not require ratings, but your lender could anywayAn automated assessment model (AVM): If you've had your current loan for some time or paid a large down payment, an AVM can certify that you have enough equity to conduct a no-valuation review and skip the cost and hassle of a traditional home valuation
Note that you cannot get cash back with Streamline refinancing. And you have the best chance of not having to waive an expert opinion if you do not take any cash home with you when you refinance.
Let's take a closer look at each of these no-rating refi options.
Refinancing with waiver of an expert opinion
If you refinance with a traditional loan, your lender may be able to forego the evaluation altogether.
An "Appraisal Waiver" means that Fannie Mae or Freddie Mac – along with your lender – agree that an appraisal is not required and let the homeowner bypass this step.
Dispensing with appraisals is relatively rare. Fannie Mae Says: "The Majority of Transactions Will" not received an offer to waive an appraisal, i.e. you need an appraisal from a qualified apartment appraiser to determine the market value.
In some cases, however, a waiver can be offered. The more meaningful your application is in terms of income, creditworthiness and equity, the better your chances of not having to waive an expert opinion.
How do you qualify for an expert opinion waiver?
Fannie Mae's desktop underwriting program may consider an evaluation waiver in the following cases:
Single-family houses, including condominiums First and second homes with a mortgage lending value (LTV) of 90% or less Investment properties with an LTV of 75% or less Disbursement refinancing for main residences with an LTV of 70% or less Cash-out refinancing for second homes or investment properties with an LTV of 60% or below
Loan-to-Value Ratio, or LTV, is another method of measuring home equity. If you have 20 percent home equity, your LTV is 80 percent.
The following persons are not entitled to an offer to be exempt from the assessment:
Homeowners and permanent home loans $ 1 million or moreHome-style loans which the mortgage insurer asks for a valuation Loans that use the rental income of the property in question to qualify Loans for which the lender decides that it needs a valuation report
Freddie Mac's Automated Collateral Evaluation (ACE) program can also do without your refinancing evaluation. The rules of this automated underwriting system are similar to those of Fannie Mae.
Some lenders call these Property Inspection Waivers (PIWs).
In order to use any of the programs, your lender would need to start the process. And even if Freddie or Fannie agree to forego your review, your lender might still ask for one.
Check your eligibility for a waiver of valuation. Start here (09/24/2021)
Use a rating-free streamline refinance
Government-backed loans like FHA, VA, and USDA mortgages have their own rules about whether you need to get an appraisal to refinance.
Usually, you don't need a rating when getting an FHA-to-FHA, VA-to-VA, or USDA-to-USDA streamline refinance. This type of loan replaces your existing loan with a new mortgage of the same type.
In most cases, your new loan amount will be equal to the balance of your current loan at the time of refinancing. So you can no longer borrow to get cash back from your equity.
However, you can take out the loan without a new appraisal.
Why no rating is required for Streamline refinancing
Streamline refinance makes it easier for homeowners to lower the interest rate and payment on their existing loan. This will reduce the likelihood of default and make the loan less risky for both lenders and investors.
Streamline refinancing benefits everyone involved. And that's why they deal more calmly with assessment requirements.
Just note that your mortgage lender may ask for an assessment even if the government doesn't.
Before applying, be sure to read the lender's details or ask your loan officer if the lender intends to order an appraisal.
Here are some more details on Streamline Refinances for Government Backed Mortgages:
FHA streamline refinancing
FHA loans are supported by the Federal Housing Administration. To refinance an FHA no-appraisal mortgage, you need to apply for and be approved for an FHA streamline.
To qualify, you must be current (not overdue) with your mortgage. And at least six months must have passed since you received your loan.
No income or credit check is required for an FHA Streamline refinance, so your finances don't have to be in perfect shape to qualify.
Check Your FHA Streamline Eligibility (September 24, 2021)
VA Streamline IRRRL (refinancing loan to lower interest rates)
Loans backed by the Department of Veterans Affairs are helping veterans, active service members, and some surviving spouses with home purchases.
A VA Streamline Refinance, also known as a VA IRRRL mortgage, is for homeowners who currently have a VA loan and want to lower their interest rate or lower their mortgage payment.
No proof of income or assets is required for this program – and no appraisal. It is the easiest refinance on the market today for borrowers who qualify for VA loans.
Check Your VA Streamline Eligibility (September 24, 2021)
USDA is streamlining refinancing
The US Department of Agriculture insures home purchase and rural loan refinancing for low to middle income borrowers.
The division also offers Streamline Refinances to existing USDA homeowners.
Its rules are slightly different from the FHA and VA streamline rules. For example, USDA loans only offer fixed rates and 30-year terms.
You must also see a payment reduction of at least $ 50 per month to be eligible for some USDA refinancing options. And you still need to be within the program's income limits. If you are earning more than 115% of your region's median income, you are not qualified.
In addition, the program does not allow a withdrawal and the property must still be your primary residence.
If the property was in a designated rural area when you took your original USDA loan, you can complete a Streamline USDA refinance even if the area does not meet the definition of "rural" today.
Check Your USDA Streamline Eligibility (September 24, 2021)
Use an AVM to skip the refinance rating
An automated valuation model (AVM) uses a computer algorithm instead of a human appraiser to determine property values.
Anyone who has ever seen real estate stocks on Zillow or similar real estate portals has already seen an AVM at work.
These computer models are based on data to measure the market value of a home. The data can include:
Other reviews: If current market value reports are already available, an AVM can include this in its assessmentSelling prices of similar houses: Just like a real estate agent, an AVM does “comps” using recent sales of similar homes as a guide to the market value of your homeCurrent property price: If you paid $ 200,000 for your home four years ago, an AVM will include this data in its analysis
AVMs measure home values quickly and efficiently and have become even more popular during the coronavirus pandemic.
However, data cannot always provide a complete picture of the value of your home. For example, an AVM cannot walk around your house like a human surveyor to see the major improvements that you have made.
So a lender can insist on traditional valuation unless it is clear that you have built up a lot of equity. For example, this might be the case if you paid a large down payment or bought the home a decade ago and haven't refinanced it yet.
When shopping around for mortgage refiners, ask if lenders could replace a traditional valuation with an AVM.
Check your refinancing options with a lender (09/24/2021)
Should I refinance without an expert opinion?
If refinancing your mortgage improves your financial situation, getting an appraisal can be worth the effort.
Keep in mind that, according to Home Advisor, a home appraisal costs only $ 310-420 on average.
If you save $ 100 per month by refinancing, you will have amortized the valuation costs in 3-4 months.
And there are other good reasons for refinancing.
For example, if your home's value has risen to the point that you could be giving up your mortgage insurance by refinancing, you should probably do so. After just a few months without mortgage insurance, you will amortize the cost of an appraisal.
You will also likely need a valuation to develop your home equity, whether it be through a payout refinance, a home loan, or a home equity line of credit (HELOC).
Since home equity financing is one of the cheapest funds available, the cost of an appraisal may not be a major factor.
What if my refinancing report is too low?
Sometimes an appraisal has a lower market value than the borrower expected. A low estimate will increase your LTV, which could derail your refinancing plans.
For example, if you are refinancing from an FHA loan to get rid of mortgage insurance, you will need 80 percent LTV to avoid mortgage insurance on your new loan.
If your appraisal shows an LTV of 85 percent, you still need private mortgage insurance for your new loan. Doing so would undermine the purpose of your refinancing transaction.
A low rating could also derail your refi plans when looking to cash out home equity.
Typically, you must leave at least 20 percent of the value of your home untouched when making a Refi Withdrawal. And if the value of your home is lower than you thought it could reduce your cash withdrawal.
Borrowers who get low scores can appeal the score, choose a different lender to get a new score, or simply postpone the refinance for a while. Neither of these are perfect solutions, but you may not have many other options.
Can a Home Review Save Money For Your Refi?
Appraisals add hundreds of dollars to your closing costs of refinancing. The process can also add a week or more to your closing time. And too low a rating can block your loan application.
Foregoing the valuation is definitely attractive at face value.
But there are times when a new evaluation report can actually save you money during the life of your loan.
For example, if your appraisal is higher than expected, you can get a lower mortgage rate.
A higher estimate will lower your loan-to-value ratio, and lower LTVs mean the lender is less at risk and may be willing to charge a lower interest rate.
However, the LTV is only one factor that affects home mortgage rates. Your creditworthiness and debt-to-income ratio also play a big role. So there is no guarantee that a review will save you money, even if it is high.
But if you've done a lot of home improvements or added an addition to your home recently, a home appraisal can improve your refinancing savings.
Check your refinancing eligibility. Start here (09/24/2021)
Frequently asked questions about refis without rating
Do you always need an appraisal for refinancing?
No. With a streamlined refinancing, the valuation can often be skipped. State-insured FHA, VA, and USDA loans all offer streamline refinance programs that allow for rating-free options. If you have a conventional loan, ask your refinancing provider about an expert opinion waiver or an AVM appraisal of your house.
How can I avoid a refinancing report?
Both Fannie Mae and Freddie Mac, the agencies that regulate compliant loans, offer a way to skip the assessment process. This is known as a waiver of judgment. These programs work best when you have a strong credit profile and low loan-to-value ratio. You may also be able to avoid paying for a rating if your lender agrees to use an automated rating model (AVM) instead of a human appraiser.
How do I get a refinancing certificate waiver?
Ask your lender to request an appraisal waiver. Fannie Mae or Freddie Mac cannot approve your waiver application unless your lender requests it first.
Should I forego the report when refinancing?
Despite the cost, an appraisal can work in your favor if the value of your home has increased since you bought it. This could be when property values in your area are rising – which most are right now – or when you have made significant improvements since moving in. Computer ratings don't always reflect the home value achieved through upgrades and improvements.
Can you get a valuation waiver for a cash-out refinance?
It is possible to forego valuation on a traditional cash-out refi, but only if you have a lot of home equity. You would have to leave at least 30 percent of your equity in the house after the payout. For many homeowners, this rule severely limits the amount of equity available.
How long does a refinancing take without an expert opinion?
Skipping the rating could cut refinance time by about a week. It often takes a home appraiser a week to plan and complete a home appraisal. Some lenders have had longer waiting times for assessment during the pandemic.
How much does a home valuation cost?
Real estate agent Redfin says the average estimate for a single family home is between $ 300 and $ 450. A valuer may ask for $ 1,000 or more for larger homes or apartment buildings. These costs may seem insignificant compared to the price you paid your home to buy, but these types of fees add up and make refinancing difficult for many homeowners.
Check your refinancing eligibility
If you want to see if you are eligible for a waiver, you need to apply to a lender. The initial application only takes a few minutes and there is no obligation to continue.
The link below will take you to a questionnaire that will match you with the right lender.
Confirm your new plan (September 24, 2021)