You almost always need an appraisal before you complete a mortgage refinance. However, your lender may waive the refinance appraisal condition if you have an FHA, VA or USDA loan.
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.
A full appraisal will require a home visit. When it comes to a refinance appraisal, you have the option to attend the appraisal if you want. The appraiser will conduct a thorough inspection of the home's exterior and interior to judge the condition of the property and make note of its size and features.
When refinancing an FHA or conventional home mortgage, a lender may require an appraisal and the same inspections as it does for financing a new home purchase. However, a “home inspection,” similar to the inspection you obtained when you bought your home, is never required.
Why Would A Lender Waive An Appraisal? Lenders rely on in-person appraisals to protect themselves: They want to make sure they are not lending more money than what a home is worth. If they do lend too much money, they could face a bigger financial loss should buyers default on their loans.
A no-appraisal mortgage is a home loan that doesn't require an appraisal. The majority of lenders provide no-appraisal mortgages for refinancing purposes while others may offer them for first-time loans. ... No-appraisal loans are offered by a number of government agencies, including the Federal Housing Administration.
A home appraisal in California is used to estimate the current market value of a home for refinancing and purchase transactions, as well as for divorce, probate, and other property disposition situations. ... Appraisals are required for all types of loans including Jumbo, Fannie Mae, Freddie Mac, FHA, and Non-QM.
The Bottom Line
You can refinance your mortgage loan to take advantage of lower interest rates, change your term, consolidate debt or take cash out of your equity. Though there is no exact time limit on how long a refinance can take, most refinances close within 30 to 45 days of your application.
If you are ready to have your home appraised, you should address any significant issues that may affect your home's value—such as damaged flooring, outdated appliances, and broken windows. A messy home should not affect an appraisal, but signs of neglect may influence how much lenders are willing to let you borrow.
Things that can hurt a home appraisal
A cluttered yard, bad paint job, overgrown grass and an overall neglected aesthetic may hurt your home appraisal. Broken appliances and outdated systems. By systems we mean plumbing, heating and cooling, and electrical systems.
If the appraised value comes in lower than what you owe on the mortgage, you may have to put off refinancing. A lower-than-expected appraisal can also dash hopes of getting rid of private mortgage insurance on a conventional loan, or reduce the amount of cash the lender will let you pocket in a cash-out refinance.
Why Lenders Reject Refinance Applications
A lender may reject a home refinance application for a multitude of reasons. Chief among them: Weak credit score and credit history: Lenders don't like to see late payments and collection accounts on a credit report, since they may be indicators of financial irresponsibility.
The FHA Streamline Refinance
The FHA Streamline is a “low–doc” refinance with limited paperwork required. The lender doesn't have to verify your income or credit, and there's no home appraisal. That means a Streamline Refinance closes faster than other loans and has slightly cheaper closing costs.
Mainstream mortgage lenders will almost always require an appraisal, whether or not it's mandated by law, because it can protect them against loss in case the borrower defaults.
Credit. The underwriter will order a credit report as soon as he starts work on your refinance. ... The underwriter also will look for red flags such as bankruptcy, foreclosure, judgments, collections and late payments. He also will tally up the total amount of monthly payments due on your debts.
Can a mortgage loan be denied after closing? Though it's rare, a mortgage can be denied after the borrower signs the closing papers. ... This may also happen during a refinance closing because borrowers have a three-day right of rescission.
How long after refinancing can you sell your house? You can sell your house right after refinancing — unless you have an owner-occupancy clause in your new mortgage contract. An owner-occupancy clause can require you to live in your house for 6-12 months before you sell it or rent it out.
The General Condition of the Home
This is one of the first things appraisers look for! ... While they won't focus on whether or not the home is clean, they will look for signs of neglect, including broken windows, damaged floors, broken appliances, cracked walls, broken doors, ripped carpeting, etc.
Landscaping can also significantly impact property values. ... When valuing a home, the appraiser must look at the subject property's landscaping compared to other properties in the area. Landscaping accounts for 85 percent of what buyers first see when looking at a home.
If A House Is Appraised Higher Than The Purchase Price
It simply means that you've agreed to pay the seller less than the home's market value. Your mortgage amount does not change because the selling price will not increase to meet the appraisal value.
A lender cannot lend more than the appraised value of the home. If the appraisal value comes back lower than the sale price, you'll either need to pay the difference out of pocket or renegotiate to a lower price. If you can't do either, your loan will be denied.
According to the Federal National Mortgage Association, most appraisals are generally good for 90 days, although this number can vary depending on factors like the type of loan and the current real estate market.
Appraisers are looking in your closets not to evaluate storage space but because they can sometimes count the closet towards square footage. ... Depending on how much notice you have of the appraiser's visit, you might have time to complete some unfinished projects.