Can I Refinance My Mortgage Without An Appraisal?
When you’re getting ready to refinance your mortgage, one factor that impacts the terms of your new loan is the appraisal. A current home appraisal creates the basis of your home’s value in today’s housing market. But not every mortgage refinance requires a home appraisal. This can relieve a lot of stress for homeowners who aren’t sure what their home is worth or are worried they might not qualify for a mortgage refinance.
Do You Always Need an Appraisal to Refinance Your Mortgage?
Skipping the home appraisal can save you money and streamline the process to refinance your mortgage. Without a home appraisal, a no-appraisal refinance requires less documentation, fewer costs, and your new mortgage will close faster than a standard refinance.
This is good news for homeowners who want to refinance quickly and take advantage of low mortgage rates and reduced fees.
How to Refinance Your Mortgage Without an Appraisal
First, talk to your lender. When it comes to refinancing, not every home loan is treated the same. If you have a government-backed loan such as a VA loan, FHA loan, or USDA home loan, you most likely won’t need an appraisal if you refinance with the same type of loan. This type of refinancing is called a Streamline Refinance and does just what it says: it streamlines the refinance process to move quickly and keep your costs down.
You can also ask your lender about applying for an appraisal waiver. If you want to refinance your mortgage without taking cash out, you might be eligible for an appraisal waiver through Fannie Mae. There are a handful of requirements, and it’s not always a straightforward process. We’d be happy to connect with you if you’re interested and help you decide whether or not this is an option.
Know the Basics: What is an Appraisal?
A home appraisal determines the current fair market value of your home. When an appraisal is needed, a third-party appraiser does a formal inspection of your home to assess its general condition, structural integrity, along with any updates or upgrades. An appraiser will also research comparable homes in the area to help determine your home’s value.
Appraisals are a useful tool for lenders because they confirm the value of your home, which is the collateral for your mortgage. The appraisal confirms the market value of the home which protects the lender from lending an amount that is higher than the appraised value.
Top 3 Ways to Refinance Your Mortgage Without an Appraisal
1. The FHA Streamline Refinance – No Appraisal Needed
The FHA Streamline Refinance doesn’t require an appraisal for most homeowners. Why? There are no minimum equity requirements for the FHA streamline refinance. In general, since the FHA is a government-backed loan, it’s in everyone’s best interest to keep your mortgage affordable. If rates have dropped since you first secured your mortgage, the FHA streamline makes it possible for you to refinance your home with the lower mortgage rate (based on the current market) and thereby reduce your monthly mortgage payment.
Eligibility:
- current mortgage must be an FHA loan
- current mortgage is at least 6 months old (210 days)
- past 6 mortgage payments paid on time
- no more than one late payment in the past 12 months
Worth noting, the FHA Streamline Refinance is a straight refinance and doesn’t allow for cash-out. Also, there needs to be a “net tangible benefit” to qualify. This means that the refinance needs to show evidence that the new loan will benefit you financially.
2. The VA Streamline Refinance – No Appraisal Needed
The VA streamline refinance is available to homeowners who currently have a VA loan. VA streamline loans are commonly called IRRRLs (Interest Rate Reduction Refinance Loans). Most VA streamline refinance loans don’t require an appraisal because they don’t require equity to approve your refinance.
You can refinance a VA home loan up 120% of your home’s value with the IRRRL. Again, VA Refinance could help you lower your interest rate, reduce your monthly payment, and secure better terms for your home loan.
Eligibility:
- current mortgage must be a VA loan
- property must be your full-time residence
- the mortgage must be at least 270 days old
- past 6 mortgage payments paid on time
Like the FHA streamline refinance, the VA streamline is a straight refinance and doesn’t allow for cash-out. Also, there needs to be a “net tangible benefit” to qualify. This means that the refinance needs to show evidence that the new loan will benefit you financially.
3. The USDA Streamline Refinance – No Appraisal Needed
The USDA Streamline Refinance is similar to the other two government-backed mortgages when it comes to refinancing. It’s available to homeowners who currently have a USDA mortgage, and it doesn’t need an appraisal because the refinance doesn’t require equity to approve your refinance.
Eligibility:
- current mortgage must be a USDA loan
- the mortgage must be at least 12 months old
- past 6 mortgage payments paid on time
- straight refinance with no cash-out option
- must meet the USDA debt-to-income ratio criteria
Like the FHA and VA, the USDA Streamline Refinance needs to show a “net tangible benefit” to qualify. This means that the refinance needs to show evidence that the new loan will benefit you financially.
Using the Automated Valuation Model (AVM)
In today’s mortgage industry, many mortgage lenders use the AVM (Automated Valuation Model) to estimate the value of your property. If you have a lot of equity in your home (more than 30%), you might be able to avoid a home appraisal altogether. Check with your lender to find out more about the AVM model and see if you’re eligible.
Final Takeaway
If you want to refinance your mortgage without an appraisal, government-backed mortgages offer a few good alternatives. You can save money and speed up the loan process by applying for a streamlined refinance. However, getting an appraisal might be a better choice if it can improve the terms of your loan or get you a lower rate, so talk with your lender to discuss your options.
What’s Next
Working with an experienced mortgage broker makes all the difference when you want to refinance your mortgage without an appraisal. If you want to skip the appraisal and apply for a refinance, give us a call. We can help.
