Recently, Fannie Mae and Freddie Mac announced a return to a policy that was discontinued last year. They are again allowing for an appraisal to be waived on certain purchase transactions as well as certain refinance transactions. In order to receive a waiver, the loan file must be run through either Fannie’s or Freddie’s automated underwriting system and receive an approval along with a notice that the property is eligible for a waiver.
At this time, neither have announced the specific criteria used to determine which properties qualify for a waiver and which ones don’t. They have issued the following guidance on the type of transactions that may qualify for a waiver:
- One-unit properties, including condominiums;
- Limited cash-out refinance transactions for
- Principal residences and second homes up to 90% loan to value
- Investment properties up to 75% loan to value
- Cash-out refinance transactions for
- Principal residences up to 70% loan to value
- Investment properties up to 60% loan to value
- Purchase Transactions
- Principal residences up to 80% loan to value
- Second homes up to 80% loan to valueBoth Fannie Mae and Freddie Mac note that the majority of transactions will not receive an appraisal waiver. Additionally, the following transactions are specifically not eligible for a waiver:
Both Fannie Mae and Freddie Mac note that the majority of transactions will not receive an appraisal waiver. Additionally, the following transactions are specifically not eligible for a waiver:
- Properties located in disaster-impacted areas;
- Construction and construction to permanent loans;
- Two to four unit properties with a value of $1,000,000 or greater;
- Loans where the mortgage insurance provider requires and appraisal; and
- Loans where rental income from the property is being used to qualify.
In cases where an appraisal waiver is granted, the borrower can still obtain an appraisal if they desire. However, if an appraisal is obtained, it will be part of the mortgage file at that point and will be evaluated by underwriting. Borrowers who are eligible for an appraisal waiver will reduce their closing costs by anywhere from $500 to $800, which is the range of appraisal fees in Colorado.