Do you have a Fannie Mae-backed mortgage, want to refinance, but do not want to have to do a new appraisal? You might be in luck. Thanks to a recent Fannie Mae program, some homeowners might not need to pay for or wait for an appraisal to do a mortgage refinance.
Rather than wait for an inspection by a human being, Fannie will use the automated valuation model on certain qualifying loans. Fannie Mae already does waive property appraisals on approximately 3% of loan applications that come into the automated underwriting system. Under the new enhanced property inspection waiver system, that number may rise to 10%.
This is a big deal because a human being doing an actual appraisal takes time. You need to schedule it typically a week or so before the day, have him spend several hours doing the appraisal. Then, you wait up to 10 days for the appraisal report. If you need to refinance now, the delay can be a problem. Plus, you can pay up to $500 for a new appraisal. It is a nice thing to avoid when you can, and Fannie Mae may let you do so.
Note that Fannie Mae’s no appraisal option applies only to refinance loans on single family homes and condos with a value up to $1 million. The loan amount must be less than the limits set by Fannie Mae, which will vary by area of the country. Also, the loan to value cannot be more than a certain amount.
On limited cash out refinances, where you take out no cash or just enough to cover closing costs, Fannie Mae may allow you to go up to 90% loan to value. It is estimated that 25% of limited cash out refinances might qualify for the appraisal waiver.
On a cash out refinance, Fannie Mae will go up to 70% loan to value if the home is occupied by the homeowner, or up to 60% if the home is a vacation home or is an investment property.
Also, to Fannie Mae needs to have a physical appraisal for the same property with the exact same borrower in the Uniform Collateral Data Portal. This is a database into which lenders enter home appraisals for any mortgages that are submitted to Fannie Mae or Freddie Mac.
This is a huge treasure trove of electronic information that is collected by human appraisers that Fannie and Freddie can use to come up with automated appraisals, but it only has been in existence for five years. So a homeowner who wants to refinance a loan that is more than five years old probably will not qualify for the appraisal waiver.
All of this data has been collected from appraisers over the years and it can be used for the advantage of Fannie Mae and some homeowners. Some appraisers are not very happy about it, but if you qualify for the waiver, you certainly will be!
However, many experts say the new Fannie program has only a limited effect on appraisers. The Appraisal Institute is not as concerned about the no appraisal offer and is more concerned about the no cost automated appraisal alternative that Fannie Mae introduced a few years ago.
This new program is more geared towards new purchase transactions. This program would be advantageous for many home buyers because it would make it easier to close on a home and reduce delays and costs. This could be very helpful if you are in a bidding war on a property in a hot area of the country.
Even with the Fannie Mae waiver program helping out some refinance customers, refinances continue to slow as of mid-2018. Total mortgage refinances fell five percent for the week ending in May 2018. The higher rates for refinances is turning off many people. A 30-year conventional refinance rate is around 4.8%, which makes it less attractive to refinance. A year ago, refinance rates were in the high 3s to low 4s.
If you want to refinance, you should probably strongly consider it soon because rates seem to be on a long term rising trajectory.