Appraisal waivers explained – tips on how to get one

Appraisal Waivers Explained

An appraisal waiver is like manna from heaven, finding money in your coat pocket, and winning the lottery – all combined. But you need to know what you’re doing to get them. I’m going to give you the inside scoop on appraisal waivers, so stay tuned.

What we’re going to talk about:

  • What is an appraisal waiver?
  • Who gives them out?
  • How do you get an appraisal waiver?
  • Strategies to increase your chances of getting one
  • But my lender guaranteed I wouldn’t need an appraisal

What is an Appraisal Waiver and Who Gives Them Out?

Simply put, it’s when we run the automated underwriting system, and because of several factors, it tells us we don’t need to do an appraisal. That’s a good thing, because it saves the borrower time and money. But let me explain further.

Fannie Mae and Freddie Mac, the two big quasi government agencies that make the rules when it come to approving a conforming loan, well, they’ve been collecting data on appraisals for a long time now. They’ve also created an automated system, where we can input the details of the loan and borrower, and they will either approve the loan, or give it the thumbs down (underwriters still need to verify all the data, that’s why you still have to supply all of those documents).

Since Fannie and Freddie write the rules, and have a huge database of appraisals, they can use those tools and determine if we need to do an appraisal or not. It’s pretty much based on risk, so if the risk is below a certain level, no appraisal will be needed. BTW, Fannie calls appraisal waivers PIW – Property Inspection Waiver, and Freddie calls them ACE – Automated Collateral Evaluation.

How Do You Get an Appraisal Waiver?

To get an appraisal waiver, Fannie and Freddie look at the property, the loan and the borrower, and each of these needs to fit in a set of parameters. Let’s take a look at what the parameters are:

  • Property
    • The biggest factor in getting the waiver is how much information Freddie and Fannie have on the property. You’ll have a much better chance in getting an appraisal waiver if there’s been an appraisal on the property in the last 5 years.
    • If the property is in a neighborhood with very similar homes, sometimes it helps if a few homes in that neighborhood have had appraisals in the last 5 years.
    • The riskier the loan, the less chance you’ll get the waiver. For Purchases, the more down payment the better. For refinances, the more equity in the home, the better. Also, if you’re getting cash out for your refinance, it will lower the chances of getting your PIW or ACE. Cash out is a riskier loan, according to the lenders. Also, loans on 2 nd homes and investment properties are less likely to get a waiver.
    • Remember, waivers are all about low risk, so the stronger the borrower is (credit score, assets, debt-to-income ratio) the more it will help.

    Strategies to Help Get an Appraisal Waiver

    We can’t see the algorithm that Fannie and Freddie use, but they do give us some guidelines, and through trial and error we’ve picked up some tricks to help.

    • For refinances, keep the home value below 1 million. Fannie nor Freddie will give the appraisal waiver if the home value is over that, so if your home is worth 1.3 million, we can change the home value (just for refinance purposes) to $999,000. The only caveat is if your loan to value goes down too much, it may affect your interest rate or other loan pricing. You can’t do this on a purchase because you have to use the purchase price.
    • Make sure your address is exactly like the post office has it in their file. If you have the address even slightly wrong (Street vs St, for example), you will get denied.
    • Don’t count rental income if you don’t need it. You will never get an approval with rental income. Works for purchases and Refinances.
    • Lower the value as much as possible without changing your rate and pricing. Fannie likes equity. Refinances only.
    • Add more assets. Sometimes we leave assets out of the application because we don’t need them to qualify in an effort to make the file cleaner. If that’s the case, try adding some back in. Stuff like retirement accounts or stock portfolios. Freddie likes assets. Good for purchases and Refinances.

    But My Loan Officer Guaranteed That I Will Get an Appraisal Waiver

    I call B.S. on that one. Until your loan officer runs credit, has a correct address, collected all the documents, put together a clean file, and uploaded it to the Automated Underwriting System, there is no way to know for sure.

    I’ve had files that I thought for sure would get a Waiver, tried everything, but no luck. There was just not enough info on the property – and how is a loan officer supposed to know that ahead of time.

    Unfortunately, there are some loan officers that will tell you what you want to hear so that you put in that application. Sad but true.

    I hope this was helpful. But if you want to increase your odds of getting an Appraisal waiver, start by using a loan officer that knows all the tricks to get you one **Cough cough – like me**.

    I’m Your first Call.

    Your first step should always be to talk to a mortgage professional. Schedule a time speak with me today, it doesn’t matter if your’e already under contract, or if you are buying until next year. I need to make sure we get you ready, and that you’re doing the right things today, so when you do make an offer, you are all set. I see too many people that take advice from the internet or non-professionals and mess up their chances to buy.

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    My name is Jesse Rivera. I’m licensed in the State of California and I live and work in beautiful Long Beach, CA. I can do loans for the whole state of California, but I specialize in SoCal, especially Long Beach, Los Angeles County and Orange county.

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