Qualifying for a No Appraisal Home Loan?
A no appraisal home loan is available with Conventional financing underwritten by either Fannie Mae or Freddie Mac.
- No Appraisal Home Loan Eligibility
- Fannie Mae Property Inspection Waiver (PIW)
- Freddie Mac Automated Collateral Evaluation (ACE)
- Rehab Loan and Home Improvement
- How to Improve Your Chances
- Working with an Expert
No Appraisal Home Loan Eligibility
With home values continuing to rise at a respectable rate, 2019 may be the year that lending gets a little easier for homebuyers with at least 20% down, and homeowners with at least 20% equity.
The problem is, not enough loan officers understand the guidelines or have the experience to know how to put you into the best position for being eligible for a no appraisal home loan.
Fannie Mae and Freddie Mac, Conventional underwriting guideline writers, have been leading the charge to use vast amounts of previously collected data to determine whether or not a physical home inspection is required to approve this loan application.
In regular english, that means no appraisal. Fannie and Freddie both have huge databases of home valuations. In many cases, they may already have data on your property in their database if you’ve purchased or refinanced recently.
Depending on your equity, and what you are using the financing for, either to purchase a new home, or to refinance your existing home, you may be eligible for a no appraisal home loan.
All we receive as lenders are the basic guidelines, which tend to be minimum requirements. Running the application through Fannie Mae DU or Freddie Mac LPA is the only way to know for sure.
Desktop Underwriter (DU) and Loan Programs Advisor (LPA) automated underwriting engines will analyze all of the data and return findings that may or may not include a waiver for the appraisal.
You must at least meet the very minimum guidelines, then meet all other risk assessment tests as well, and you might just win that lottery!
Property Inspection Waiver (PIW)
When you are using Fannie Mae’s Desktop Underwriter, and you meet all of the requirements for a no appraisal home loan, you will receive a Property Inspection Waiver, or PIW, with your DU findings.
When you receive an appraisal waiver, Fannie Mae accepts the value estimate submitted by the lender as the market value for the subject property on the value, condition, and marketability of the property.
Eligible Transactions | Minimum Requirements
- Single family, one unit properties, including condominiums
- Limited cash-out refinance transactions / rate and term refinance
- Principal residences and second homes up to 90% LTV/CLTV
- Investment properties up to 75% LTV/CLTV
- Cash-out refinance transactions:
- Principal residences up to 70% LTV/CLTV
- Second homes and investment properties up to 60% LTV/CLTV
- Purchase transactions:
- Principal residences and second homes up to 80% LTV/CLTV
- Loans that receive an Approve/Eligible recommendation
- Properties in high-needs rural locations, as identified by FHFA
- Principal residences up to 97% LTV/105% CLTV (for borrowers at or below AMI)
- Contingent on mandatory property inspection
Ineligible Transactions – No Waiver Available
- Construction and construction-to-permanent loans
- Two to four unit homes
- When the value of the subject property provided to DU is $1,000,000 or greater
- HomeStyle® mortgage products (Renovation and Energy)
- Texas 50(a)(6) loans
- Leasehold properties, community land trust homes, or other properties with resale restrictions
- Cooperative units and manufactured homes
- DU loans that receive an ineligible recommendation
- Loans for which the mortgage insurance provider requires an appraisal
- Loans for which rental income from the subject property is used to qualify
- When the lender has any reason to believe an appraisal is warranted
It’s important to note that the majority of transactions will not receive a property inspection waiver, which means they require an appraisal by a qualified residential appraiser to establish the market value.
Automated Collateral Evaluation (ACE)
Freddie Mac’s ACE differs slightly from PIW in several ways. Freddie Mac Conventional does not allow a no appraisal home loan if you are refinancing to take cash out of your home. Fannie Mae will allow this.
Fannie will also allow up to 90% on a rate and term refinance, Freddie only allows up to 80% loan to value.
As a California mortgage broker myself, we will often see situations where we will get a Freddie Mac approval, and not a Fannie Mae approval. While Freddie Mac’s ACE program is more restrictive than Fannie Mae, it’s available when Fannie is not.
Eligible Transactions | Minimum Requirements
- Loan Product Advisor Accept risk class
- 1-unit primary residence or second home
- Condominium units*
- No cash-out refi transactions with LTV/TLTV less than or equal to 80%
- Purchase transactions with LTV/TLTV less than or equal to 80%
*Condominium unit loans that are eligible for ACE must still comply with Freddie Mac’s condominium project review and eligibility requirements.
Ineligible Transactions – No Waiver Available
- An appraisal has been obtained and submitted to the UCDP®
- Loan Product Advisor Caution risk class
- Cash-out refinances
- Investment properties
- 2- to 4-unit properties
- Manufactured home or leasehold estate
- Properties with resale restrictions
- Construction Conversion and Renovation Mortgages
- Non-arm’s length transactions
- Purchases of REO properties (as identified in the sales contract)
- Texas Equity Section 50(a)(6) mortgages
- Mortgages with an estimate of value or purchase price greater than $1 million
- Freddie Mac Relief Refinance MortgagesSM – Same Servicer or Open Access
You should always ask your loan officer to run both Fannie Mae DU and Freddie Mac LPA. The property inspection waiver is only one minor difference between the two sets of guidelines.
Freddie Mac has surprised me many times when I thought for sure that a loan met Fannie Mae underwriting guidelines.
Rehab Loan and Home Improvement
One of the great advantages of receiving a no appraisal home loan go beyond saving the money you would have spent on an appraisal.
You would be forced to use a rehab loan like a FHA 203k or Fannie Mae HomeStyle Renovation loan if there are is any incomplete construction on your project.
If you receive a waiver, and qualify for a no appraisal home loan, you’re in the clear.
The great advantage of this opportunity is that we can run the automated underwriting approval up front, and know immediately upon receiving the results whether or not you qualify for a no appraisal home loan.
To not even try this approach would be limiting your options to potentially more expensive rates and fees.
This leads right into our next topic, which is working with a loan officer experienced enough to set up the file to maximize your opportunity
How to Improve Your Chances
A big part of receiving a property inspection waiver seems to be that address needs to appear on the application as it is documented in the USPS address lookup database.
An inexperienced or lazy loan officer may not take the time to make sure that your application is submitted as documented by USPS.
The important details that could save you hundreds of dollars on an appraisal include:
- St. vs Street – Spelling of address type
- W. vs West – Spelling of directions
- Apt vs # – Spelling of unit location
- Zip + 4 – Last 4 of Zip required
It’s really as simple as either the loan officer running the address through the USPS database, or many online applications will automatically update the address to meet Fannie and Freddie data matching requirements.
Either way, if you are reading this article, chances are you’re in a situation where you believe you need a no appraisal home loan, or heck, you might just want one! Why not?
My last observation as an experienced loan officer is that working with a professional is best way to ensure that you are receiving all of the options available to you, and that you are not simply not receiving benefits because of a lack of experience or laziness on your loan officer’s part.
Working with Professionals
I can not emphasize enough the importance of hiring a professional, experienced Realtor and loan officer when selling or buying your first home.
When you call a lender from a TV or radio commercial, or click an ad you saw on the internet that has a catchy headline, you are playing competence roulette.
I personally have been in the business for almost 20 years now, and started this website 10 years ago to educate and empower consumers.
We have had over a million consumers visit this website and I have answered many thousands of questions from folks all over the Country.
If you are trying to buy or refinance your home in California, I can help. You may ask questions about your options below, or shoot me an email directly to firstname.lastname@example.org.
If you are outside of California, I can introduce you to a loan officer from our Expert Network that I personally know and trust.