Appraisal Waivers Expanded for Conforming Purchases

The FHFA announced expanded guidelines for appraisal waiver increasing the maximum loan to value (LTV) from 80% to 90% on purchase transactions. An appraisal waiver is not guaranteed on all conforming mortgages. Loans are submitted to the automated underwriting systems for Fannie Mae or Freddie Mac, which determine whether or not a transaction will receive an appraisal waiver.

Possible eligible transactions include:

• One-unit properties, including condos. Manufactured homes are not allowed.
• Homes valued under $1,000,000.
• Principal Residence:
  • Purchase and limited cash-out refinances up to 90% LTV.
  • Cash-out refi up to 70% LTV.
• Second Home
  • Purchase and limited cash-out refinances up to 90% LTV.
  • Cash-out refi up to 60% LTV.
• Investment Property (unless rental income for the subject property is used to qualify).
  • Purchase and limited cash-out refinances up to 75% LTV
  • Cash-out refi up to 60% LTV.

Pros for an appraisal waiver includes reducing the cost of a transaction and help expedite the closing.

One may want reconsider having an appraisal waiver if they’re relying on the appraisal to determine value of the home. An appraisal can provide a buyer with a possible “out” on a real estate contract or a chance to re-negotiate if the appraisal comes in low (depending on if the purchase and sales agreement is subject to an appraisal). An appraisal is not the same as a home inspection and is not intended to determine minor defects with a home. An underwriter may decide that an appraisal may still be necessary even if the automated underwriting system issues an appraisal waiver.

If you’re thinking about buying or refinancing a home, I’m happy to help you.