No-Appraisal Mortgage Loans: Basics and Alternatives

For the vast majority of mortgage and homebuying situations, a home appraisal is an important part of the process. This involves a third party appraiser examining the property inside and out to provide a professional estimate of its market value, helping confirm to both buyers and sellers (and even lenders) that the price being agreed upon is realistic plus multiple other areas.

At Altius Mortgage, we’re happy to assist all our clients with the appraisal process if needed, including first-time homebuyers, for whom we offer great mortgage rates and programs while also providing expertise and guidance through this process. We’re also available to work with borrowers for a more unique pursuit: A no-appraisal loan, which is much rarer than the normal appraisal process but will still be used in some cases. This two-part blog will go over the details of this program and why it’s sometimes used, plus the kinds of borrowers who might be good candidates for it.

No-Appraisal Loan Basics

As the title suggests, a no-appraisal loan is a home loan that requires no professional appraisal. There are a few methods by which this type of loan might be attained, the most common of which is known as an appraisal waiver – this gives the homebuyer the right to decline having a traditional appraisal done on their property.

As we’ll dig into a bit further later on, no-appraisal loans are not common at all for private residential properties, largely because they present a great risk to both the parties involved and the lender. If there is no objective evaluation of the property, it could come in far more or less valuable than the mortgage amount – leaving borrowers at risk of default on one side of the coin, or sellers stuck with far less than their asking price on the other. However, as of 2017, both Fannie Mae and Freddie Mac have begun offering some select appraisal waivers.

Appraisal Alternatives

The most common alternative used during a no-appraisal loan is a computer calculation program that plays something of a similar role, though with less specific involvement. This program will utilize information like previous home value and other properties in the area to place a value on the home – but as you may have guessed, this alternative is less precise than an actual in-person appraisal.

In other cases, no appraisal will be required at all.

Refinances

A no-appraisal refinance loan is also possible using this same method, and this is an area that isn’t quite so restrictive. Especially in cases where you’re using the same lender for both your original loan and your refinanced loan, there are often relaxed standards allowing no-appraisal refinances – programs like the VA loan, the FHA loan and the USDA loan all have systems in place to make refinancing easier from an appraisal standpoint.

For more on no-appraisal home loans, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.