How to refinance without an appraisal: 3 Strategies

Gina Pogol
The Mortgage Reports contributor

Can you refinance without an appraisal?

Appraisals are expensive and time-consuming. They can even put your refinance at risk if the appraiser gives you a low value.

The best option? Skip the appraisal entirely.

Fortunately, that possibility is becoming more likely as agencies like Fannie Mae and Freddie Mac loosen refinance rules. And government programs like FHA, USDA, and VA all offer appraisal-free options.

Ready to get started on your no-appraisal refinance? Let’s take a closer look.

Check your eligibility for an appraisal waiver with a top lender. Start here (Dec 4th, 2021)

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How to get a no-appraisal refinance

The value of your home is a key variable for any mortgage loan, whether you’re buying or refinancing. Lenders need to know how much your home is worth so they know they’re making a safe investment. And that’s where a third-party appraisal comes in.

An appraisal is almost always required. But, if you meet certain requirements, you might be able to skip this part of the process.

Here are three ways to refinance without an appraisal:

  1. An appraisal waiver: Fannie Mae and Freddie Mac, the agencies that regulate conventional loans, may allow lenders to waive appraisals for stronger refinance applicants
  2. A Streamline Refinance program: Government-backed loans such as FHA, VA, and USDA offer Streamline Refinances. These loans are designed to save money by lowering your mortgage rate without racking up a lot of upfront closing costs. The government agencies that back these loans don’t require appraisals, but your lender still might
  3. An automated valuation model (AVM): If you’ve had your current loan for a while, or if you made a large down payment, an AVM could confirm you have enough equity for a no-appraisal refi and skip the cost and hassle of a traditional home appraisal

Note that Streamline refinancing doesn’t allow you to get cash back. And you’ll have the best chances at receiving an appraisal waiver if you are not taking cash out of your home when refinancing.

Let’s take a closer look at each of these no appraisal refi possibilities.

Refinance with an appraisal waiver

If you’re refinancing with a conventional loan, your lender may be able to waive the appraisal entirely.

An ‘appraisal waiver’ means Fannie Mae or Freddie Mac — along with your lender — agree no appraisal is required and let the homeowner bypass that step.

Appraisal waivers are relatively rare. Fannie Mae says “The majority of transactions will not receive an appraisal waiver offer, which means they require an appraisal by a qualified residential appraiser to establish the market value.

However, a waiver may be offered in some cases. The stronger your application in terms of income, credit score, and equity, the better your chances at getting an appraisal waiver.

How do you qualify for an appraisal waiver?

Fannie Mae’s Desktop Underwriting program can consider appraisal waivers for the following:

  • Single-unit properties, including condos
  • Primary residences and second homes with a loan-to-value ratio (LTV) of 90% or lower
  • Investment properties with an LTV of 75% or lower
  • Cash-out refinances for primary residences with a 70% LTV or lower
  • Cash-out refinances for second homes or investment properties with a 60% LTV or lower

Loan-to-value ratio, or LTV, is another way to measure home equity. If you have 20 percent home equity, your LTV is 80 percent.

The following are not eligible for an appraisal waiver offer:

  • Construction and construction-to-permanent loans
  • Multi-unit properties
  • Loans on homes with property values of $1 million or more
  • HomeStyle loans
  • Texas 50(a)(6) loans (Texas cash-out refinances)
  • Properties with resale restrictions such as leasehold properties and community land trust homes
  • Co-ops and manufactured homes
  • Loans on which the mortgage insurance provider requires an appraisal
  • Loans that use the subject property’s rental income to qualify
  • Loans on which the lender decides it needs an appraisal report

Freddie Mac’s Automated Collateral Evaluation (ACE) program can also waive your refinance appraisal. This automated underwriting system’s rules resemble Fannie Mae’s.

Some lenders call these Property Inspection Waivers (PIWs).

To use either program, your lender would have to start the process. And even if Freddie or Fannie agree to waive your appraisal, your lender might still require one. 

Check your eligibility for an appraisal waiver. Start here (Dec 4th, 2021)

Use a no-appraisal Streamline Refinance

Government-backed loans like FHA, VA, and USDA mortgages have their own rules about whether you need to order an appraisal to refinance.

You usually won’t need an appraisal if you get 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 the same as your current loan’s balance at the time of refinancing. So you can’t borrow more to get cash back from your equity.

But you can close the loan without a new appraisal. 

Why Streamline refinancing doesn’t require an appraisal

A Streamline Refinance makes it easier for homeowners to lower the interest rate and payment on their existing loan. This reduces the chance they’ll default and makes the loan less risky for lenders and investors.

So a Streamline Refinance benefits everyone involved. And that’s why they’re more relaxed about appraisal requirements.

Just note that your mortgage lender can require an appraisal even if the government doesn’t.

Before applying, be sure you’ve read the lender’s disclosures or asked your loan officer whether the lender plans to order an appraisal.

Here are some more details on Streamline Refinances for government-backed mortgages:

FHA Streamline Refinance

FHA loans are backed by the Federal Housing Administration. To refinance an FHA mortgage without an appraisal, you must apply and be approved for an FHA Streamline.

To qualify, you must be current (not delinquent) on your mortgage. And at least six months must have passed since you received your loan.

No income or credit review 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 (Dec 4th, 2021)

VA Streamline IRRRL (Interest Rate Reduction Refinance Loan)

Loans backed by the Department of Veterans Affairs help veterans, active-duty military members, and some surviving spouses buy homes.

A VA Streamline Refinance, also known as a VA IRRRL mortgage, is for homeowners who have a VA loan currently and want to drop their interest rate or lower their mortgage payment.

This program does not require proof of income or assets — and does not require an appraisal. It’s the easiest refinance available in today’s market for borrowers who qualify for VA loans.

Check your VA Streamline eligibility (Dec 4th, 2021)

USDA Streamline Refinance

The U.S. Department of Agriculture insures home purchase and refinance loans in rural areas for low- to moderate-income borrowers.

The department also offers Streamline Refinances to existing USDA homeowners.

Its rules are slightly different from FHA and VA Streamline rules. For example, USDA loans offer only 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 refinance options. And you must still fall within the program’s income limits. If you make more than 115% of your area’s median income you won’t qualify.

In addition, the program does not allow cash out and the property must still be your primary residence.

If the property was in a designated rural area when you took out your original USDA loan, you can still complete a Streamline USDA refinance even if the area does not meet the “rural” definition today.

Check your USDA Streamline eligibility (Dec 4th, 2021)

Use an AVM to skip the refinance appraisal

An Automated Valuation Model (AVM) uses a computer algorithm instead of a human appraiser to determine real estate values.

If you’ve ever seen home values on Zillow or similar real estate sites, you’ve already seen an AVM at work.

These computer models rely on data to measure a home’s market value. The data can include:

  • Other valuations: If recent market value assessments already exist, an AVM can incorporate them into its valuation
  • Sales prices of similar homes: Just like a real estate agent, an AVM will run “comps” using recent sales of similar homes as a guide to your home’s market value
  • Most recent price of property: If you paid $200,000 for your home four years ago, an AVM will incorporate that data into its analysis

AVMs measure home values quickly and efficiently, and they have grown even more popular during the Coronavirus pandemic.

But data can’t always provide a full picture of your home’s value. For example, an AVM can’t walk around your home to see the major improvements you’ve made like a human appraiser can.

So a lender may insist on a traditional appraisal unless it’s clear you have a lot of equity built up. This may be the case if you made a large down payment or bought the home a decade ago and haven’t yet refinanced, for example.

As you shop around for mortgage refinance lenders, ask whether lenders could substitute an AVM for a traditional appraisal.

Check your refinance options with a lender (Dec 4th, 2021)

Should I refinance without an appraisal?

If refinancing your mortgage will improve your financial situation, it may be worth the expense of an appraisal.

Keep in mind that a home appraisal costs just $310-$420 on average, according to Home Advisor.

If you save $100 per month by refinancing, you will have recovered the appraisal cost in 3-4 months.

And there are other good reasons to refinance, too.  

For instance, if your property value has risen to the point that you’d be able to drop your mortgage insurance by refinancing, you should probably do it. You may recoup the cost of an appraisal in just a few mortgage-insurance-free months.

You’ll also probably need an appraisal to tap your home’s equity, whether via a cash-out refinance, home equity loan, or home equity line of credit (HELOC).

Because home equity financing is some of the cheapest money available, the cost of an appraisal may not be much of a factor.

What if my refinance appraisal comes in too low?

Sometimes an appraisal will show a lower market value than the borrower expected. A low appraisal will increase your LTV, which could derail your refinance plans.

For example, if you’re refinancing out of an FHA loan to get rid of mortgage insurance, you’d need an LTV of 80 percent to avoid mortgage insurance on your new loan.

If your appraisal report shows an LTV of 85 percent, you’d still need private mortgage insurance for your new loan. This would undermine the purpose of your refinance transaction.

A low appraisal could also derail your refi plans if you want to cash out home equity.

Typically, you need to leave at least 20 percent of your home’s value untouched when you do a cash-out refi. And if your home’s value is lower than you thought, that could reduce the amount of cash available to withdraw.

Borrowers who get low appraisals can appeal the appraisal, choose a different lender to get a new appraisal, or simply postpone the refinance for a while. None of these are perfect solutions, but you may not have many other options.

Can a home appraisal save money on your refi?

Appraisals add hundreds of dollars to your refinance closing costs. The process could also add a week or more to your closing time. And a too-low appraisal can stall your loan application.

So waiving the appraisal is definitely attractive at face value.

But there are times when a fresh appraisal report might actually save you money over the life of your loan.

For example, you may be able to get a lower mortgage rate if your appraisal comes in higher than expected.

A higher appraisal lowers your loan-to-value ratio, and lower LTVs mean the lender is putting less on the line and may be willing to charge a lower interest rate.

LTV is only one factor influencing home mortgage rates, though. Your credit score and debt-to-income ratio matter a lot, too. So there’s no guarantee an appraisal will save you money even if it comes in high.

But if you’ve made a lot of home improvements or built an addition to your home recently, a home appraisal may enhance your refinance savings.

Verify your refinance eligibility. Start here (Dec 4th, 2021)

No-appraisal refi FAQs

Do you always need an appraisal to refinance?

No. Streamline refinancing can often skip the appraisal. Government-insured FHA, VA, and USDA loans all offer Streamline Refinance programs that allow for no-appraisal options. If you have a conventional loan, ask your refinance lender about an appraisal waiver or about using an AVM’s appraised value of your home.

How can I avoid a refinance appraisal?

Both Fannie Mae and Freddie Mac, the agencies that regulate conforming loans, offer a way to skip the appraisal process. This is known as an appraisal waiver. These programs work best when you have a strong credit profile and a low loan-to-value ratio. You may also be able to avoid paying for an appraisal if your lender agrees to use an automated valuation model (AVM) rather than a human appraiser.

How do I get an appraisal waiver for refinancing?

Ask your lender to apply for an appraisal waiver. Fannie Mae or Freddie Mac can approve your application for an appraisal waiver only if your lender applies for it first.

Should I waive the appraisal when I refinance?

Despite its cost, an appraisal may work in your favor if your home’s value has risen since you bought it. That might be the case if home values in your area are rising — which most are at the moment — or if you’ve made significant home improvements since moving in. Computer valuations don’t always reflect home value added by upgrades and improvements.

Can you get an appraisal waiver on a cash-out refinance?

It’s possible to waive the appraisal on a conventional cash-out refi, but only if you have a lot of home equity. You’d have to leave at least 30 percent of your equity in the home after cashing out. For many homeowners, this rule seriously limits the amount of equity available to withdraw.

How long does refinancing take without an appraisal?

Skipping the appraisal could shave about a week off the time it takes to refinance. A home appraiser often needs a week to schedule and complete a home valuation. With some lenders, appraisal wait times have been longer during the pandemic.

How much does a home appraisal cost?

Real estate broker Redfin says the average appraisal for a one-unit home ranges from $300 to $450. An appraiser could charge $1,000 or more for larger homes or multi-unit property types. This cost may seem insignificant compared to the purchase price of your home, but these sorts of fees add up and make refinancing more difficult for many homeowners.  

Check your refinance eligibility

If you want to see whether you qualify for an appraisal waiver, you need to apply with a lender. The initial application takes just a few minutes and there’s never any obligation to proceed.

The link below will take you to a questionnaire that will match you with the right lender.

Verify your new rate (Dec 4th, 2021)