Getting an appraisal on your home before you refinance is more than just a hassle and an expense. If your appraisal comes out with the value that you need to get your desired refinance mortgage, you will have spent time tidying up your home’s interior and exterior appearance as well as spending hundreds or, in some cases, thousands of dollars for the appraisal. If your appraisal does not come out with the value that you need, you could end up unable to refinance.
From the peak of the housing market at the end of 2006 to the trough of the market at the end of 2010, the total value of the US housing stock declined by more than 6 trillion dollars. Your house has likely lost a great deal of value. As such, if there is any way that you can avoid getting an appraisal, you will probably be better off.
Luckily, there are a number of different options for no appraisal refinance mortgages. In fact, as long as you do not have a jumbo loan of over $417,000, you should be able to take advantage of one of the many no-appraisal refinance programs available today.
How To Refinance FHA / VA / USDA Loans Without an Appraisal
If you have a government loan like a FHA, VA or USDA rural development mortgage, you can take advantage of the “streamline” refinance program, also referred to as an “interest rate reduction refinancing loan” (IRRRL). While the rules vary slightly depending on which type of loan you are refinancing, all three programs share common terms:
- You should not need to get an appraisal
- While you can include closing costs in the loan, you cannot take cash out
- The refinancing should leave you better off by either reducing your monthly payment, moving you to a shorter-term loan, or transitioning you from an adjustable to a fixed-rate mortgage
- While lenders can impose some underwriting requirements including a review of your credit score, the qualification standards are relatively lax.
Needless to say, these refinance no appraisal loans represent an excellent way for every home owner with an FHA, VA or USDA loan to take advantage of today’s low interest rates.
How to Refinance Fannie Mae and Freddie Mac Loans Without an Appraisal
The Home Affordable Refinance Plan (HARP) lets homeowners who have Fannie Mae or Freddie Mac loans refinance regardless of how much they owe on their homes. The HARP 2.0 program allows anyone with a Fannie or Freddie mortgage to refinance their loan regardless of their property’s value.
The only qualifying requirement is that your existing loan must have no late payments in the last six months and no more than one late payment in the preceding six months. Otherwise, as long as you took out the mortgage that you will be refinancing before June of 2009, you should be able to take advantage of this program.
Benefits of a No Appraisal Refinance
The benefit of any refinance without appraisal is that you do not have to spend time and money to prepare for and order appraisal. Your loan can also close more quickly since the lender does not have to wait for the appraiser to visit your home and complete an appraisal report. Of course, an appraisal-free loan also eliminates the risk that your home will fail to appraise.
Fannie Mae streamline refinance without appraisal loans and other mortgage refinance without appraisal packages have other benefits as well. Most of them come with relaxed qualification standards, making it easier for you to qualify for a refinance even if your debt-to-income ratio is tight or if you have less than perfect credit. In fact, many of these programs will approve you even if your credit score is in the 600’s.
What Is a Refinance Free Appraisal Loan
When a lender talks about a refinance free appraisal loan, what they are referring to is a no appraisal refinance packaged with certain additional benefits. Also called no-cost refinancing loans, these loans not only let you refinance without appraisal but without any up front costs either. This is achieved by amortizing the points and other loan fees into the mortgage itself, in other words spreading it out over the life of the new loan. In this way, the borrower gets to save money now on refinancing and the lender gets to enjoy the slow trickle of extra money in each monthly payment coming in, with interest. Alternatively, if a borrower can afford to pay those closing costs up front, they save themselves a great deal more on the no appraisal refinance over the long term.
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