304 North Cardinal St.
Dorchester Center, MA 02124
304 North Cardinal St.
Dorchester Center, MA 02124
A mortgage appraisal is an assessment of the current market value of a property. It is conducted by a licensed real estate appraiser on behalf of the mortgage lender when a buyer is seeking a mortgage loan to purchase a home.
The appraiser will physically inspect the interior and exterior of the property. They will take into account the home’s size, age, condition, upgrades, neighborhood, comparable recent sales, and other factors to determine the property’s fair market value.
The appraised value of the home is a key data point used by the lender during the mortgage underwriting process. It helps ensure the buyer is not overpaying for the property and that the home serves as sufficient collateralfor the loan.
A mortgage lender can waive an appraisal under certain conditions. Appraisal waivers are often granted for refinances or mortgage renewals, especially if a recent appraisal has been conducted. Factors such as the loan type, borrower’s financial profile, and the amount of equity in the home can influence a lender’s decision to offer an appraisal waiver.
There are a few key reasons why mortgage lenders require an appraisal to be completed before approving a home loan:
So in short, the appraisal protects the interests of both lender and borrower when making a major financial decision like a home purchase. It provides an independent, unbiased estimate of the property’s market value.
In certain scenarios, yes – a mortgage lender can waive the appraisal requirement on a home loan.
Appraisal waivers are most common on refinances or mortgage renewals, especially when there has been a recent appraisal done on the property.
For home purchases, lenders may still require an appraisal but provide more flexibility on the type, such as a more affordable drive-by or automated valuation instead of a full interior inspection.
Lenders can use discretion to offer an appraisal waiver based on the perceived risk of the transaction, typically determined by:
So under the right circumstances, borrowers may be able to avoid an appraisal and the associated cost and time.
Mortgage lenders have the option to waive appraisals on certain loans and for certain borrowers. Here are some common scenarios:
Different loan programs have varying appraisal requirements. For example:
So depending on the specific loan program, an appraisal may not be universally required.
A lower LTV ratio means less risk for the lender, as there is more equity cushion in the home. Many lenders allow appraisal waivers for refinances with LTVs around 70% or less.
For purchases, lenders may offer waivers for substantial down payments of 20% or more, indicating borrowers have “skin in the game”.
Credit scores above a certain threshold are generally seen as lower risk by lenders. For Fannie Mae loans, borrowers with scores of 720+ may qualify for appraisal waivers on some refinances.
Strong credit and financial profiles imply borrowers are less likely to default on the mortgage.
For refinances or mortgage renewals, lenders often allow appraisal waivers since there is an existing relationship with the borrower. Especially if they recently assessed the home’s value.
This saves time and cost compared to ordering a new appraisal on a property the lender is already familiar with.
Getting an appraisal waiver approved comes with a few potential advantages for borrowers:
Without an appraisal, the loan can close more quickly since there is one less step. Appraisers often have busy schedules, so appraisal waivers avoid timing delays.
Borrowers pay for appraisal fees out of pocket, typically $400-$700. Waiving it saves on these upfront costs.
If an appraisal values the property below the contract price, it puts the entire deal at risk. An appraisal waiver provides certainty.
While appraisal waivers have benefits, there are also potential risks borrowers take on:
Without a third-party appraisal, there is risk of overestimating the property’s market value and overpaying as the buyer.
If an appraisal waiver inflates the purchase price, it becomes an issue later when trying to sell or refinance without adequate equity.
So in certain situations, accepting an appraisal waiver could actually end up costing borrowers more in the long run. It pays to be cautious.
If you are interested in requesting an appraisal waiver, here are some tips:
There are no guaranteed tricks, but steps that may improve your chances include:
The keys are reducing risk factors and making a compelling case to the lender that a waiver is justified.
If an outright waiver is not approved, lenders may offer streamlined alternatives:
These options provide cheaper and quicker valuations compared to full interior appraisals. Discuss options with your lender.
In summary, mortgage lenders have discretion to waive appraisals for qualifying borrowers and loan types. While appraisal waivers can save time and money, understand the risks before foregoing this important valuation step in the home buying process. Carefully evaluate if an appraisal waiver or alternative makes sense for your unique scenario.