Buying or refinancing a home means there are closing costs. Obviously, an appraisal is a given since it must provide the property’s value. Although, sometimes an appraisal waiver is possible. Also known as the property inspection waiver, this allows a homeowner or buyer to save time and money by skipping the appraisal process. Usually, questions then arise such as: What is an appraisal waiver, how do I get one, should I use a PIW, is there a cost, and does my lender honor a PIW?
What is a Property Inspection Waiver?
A key part of the home loan process is ensuring that the collateral for the loan is adequate. That’s where a real estate appraisal comes in. Depending on the area, property type or size, loan type, and appraiser, the appraisal cost may range from $450 – $750. Even more for some scenarios! But, sometimes the appraisal may be waived on a purchase or refinance.
When lenders submit for an automated Fannie Mae and Freddie Mac conventional loan pre approval, part of the review is the property value. On any automated underwriting system, lots of calculations are being performed. Simultaneously, many risks and benefits are being weighed to determine if a loan approval is warranted. Part of this pre approval process includes researching the value entered for the property. Fannie or Freddie’s automated system compares the entered value / price to its compiled data on the local real estate market.
If the file is pre approved and there is enough data to support the value, lenders will receive a message such as “Fannie Mae accepts the value entered”. In other words, the property inspection waiver may be used. Resulting in the ability to waive the appraisal process and cost!
Property Inspection Waiver Disclosure
Let’s say that the pre approval allows for an appraisal waiver and the borrower accepts. Then, the lender must provide all borrowers on the loan with a property inspection waiver disclosure.
When Does Fannie Mae Allow a PIW?
The following are the Fannie Mae conventional loan property inspection waiver requirements. First, the property must be a single unit home which includes Fannie approved condos. Next, the loan must receive an automated pre approval. Then, the following are requirements for purchases or refinances…
- Limited Cash Out Transactions
- Primary and second homes up to 90% LTV
- Investment properties up to 75% LTV
- Cash Out Refinance Transactions
- Primary residence up to 70% LTV
- Second home and investment up to 60% LTV
- Purchase Transactions
- Primary and second homes up to 80% LTV
Additional Benefits of Today’s Mortgage Loans
Besides appraisal waivers, there are so many other enhancements with today’s mortgage loans.
- Flexible student loan guidelines including using $0 income based repayment rather than 1% of balances
- Buying a home for family members
- Low to no money down options
- Down payment assistance programs
There are so many other benefits that can be uncovered by an expert loan officer. So, make sure to reach out to us with your scenario.
Which Loans Allow No Appraisal?
Actually, appraisal waivers are available in right many loan types. Although, most often in rate and term refinance loans. When it comes to a property inspection waiver, the following loan types allow it:
- VA IRRRL streamline refinance
- FHA streamline refinance
- USDA streamline refinance
- Fannie Mae refinance
- Freddie Mac refinance
- Fannie Mae or Freddie Mac purchase
Even if there are chances of no appraisal on the above loans, there are other loans that always require an appraisal. These include a VA, FHA, or USDA purchase. Additionally, renovation and construction loans always require an appraisal simply because they are really necessary to determining collateral valuation.
Should I Use a Property Inspection Waiver?
Saving 1 – 2 weeks plus $450 – $750 in costs sounds like a no brainer. Right? Your lender asks if you want to accept the appraisal waiver. Initially, the reaction may be one of surprise. An easy decision is for homeowners. On a refinance, the owner lives in the house and would gladly exclude an appraisal. But, a buyer may still want an appraisal. So, in cases where the buyer is not as confident in the value, a buyer may still spend the money for an appraisal.
Remember in the case of choosing an appraisal over an appraisal waiver, once the appraisal is used, there is no going back to the waiver. So if issues arise on the appraisal report, they must be addressed.
Recently, we offered a buyer a PIW at no cost. This purchase included a 650 credit score with 20% gifted funds for down payment. The buyers wanted to close very quickly. Because the appraisal was waived, this sped up the closing process by at least a week and the buyer closed very early.
Is There a Cost for an Appraisal Waiver?
Some lenders charge a Property Inspection Waiver fee, although we do not. If the appraisal is waived, there is no appraisal fee or waiver fee!