While home appraisals are a common and often important part of the mortgage and homebuying process, there are certain situations where they might not be necessary. In these situations, something called an appraisal waiver will be utilized for certain qualified homebuyers.
At VIP Mortgage Inc., we’ll walk you through the entire homebuying process, from getting you the best mortgage rates to various home purchase factors, including the appraisal and a potential appraisal waiver if your situation calls for one. These are relatively rare on today’s market, and they certainly come with some risks you must be aware of before considering one. Let’s go over everything you need to know about appraisal waivers.
As we noted above, an appraisal waiver is something that gives qualified homebuyers the option to decline and appraisal by a third party on the property prior to sale. Instead of such an appraisal, which involves an actual inspection by the appraiser, the lender will instead use a computer program that works with previous home value information to calculate an appraised value for the entire property.
In certain situations, appraisal waivers are beneficial to those receiving them. Their first major benefit is cost – the homebuyer usually is the one on the hook for paying for the appraisal, which is not something you have to worry about with an appraisal waiver. This often means buyers can put more toward their down payment.
In addition, appraisal waivers are sometimes used by those looking to close a mortgage and home sale quickly. There’s no need to schedule the appraiser and wait for results, which can shed days or even weeks from the process.
It’s also important to understand the risks inherent in any appraisal waiver from a buyer’s perspective. Appraisals are often an important factor in the homebuying process, as they can identify issues with the home that allow you to settle these with the seller before completing the sale.
If the valuation of your home comes in lower than your purchase price, but said price is already locked in, you will come into the purchase with negative equity. In addition, homebuyers have no legal recourse against lenders for incorrect valuations if no appraisal is done.
Per rules set by Fannie Mae, here are the qualification guidelines for appraisal waivers:
For more on appraisal waivers, or to learn about any of our home loan services, speak to the staff at VIP Mortgage Inc. today.