How to Refinance a Mortgage Without An Appraisal

For homeowners who want to refinance a mortgage in 2022, uncertainty can cloud the process. Mortgage rates and inflation are in constant flux and it’s hard to know if the time is right. But one factor that can cause unnecessary worry is the home appraisal.

For most homeowners who decide to refinance, the terms of a new home loan are often directly impacted by a formal home appraisal. If you want to refinance to lower your monthly payment or secure a lower rate, preparing for a home appraisal can be stressful.

Did you know that not every mortgage refinance requires a home appraisal? Homeowners who want to refinance a mortgage without an appraisal in 2022 have solid options.

If you’re refinancing in 2022, you might not need a home appraisal. This quick guide helps explain the process.

Related: Learn the truth about zero-cost and no-cost loans

Mortage Basics: How Do Home Appraisals Work With a Mortgage Refinance?

Refinancing a mortgage requires the homeowner to have enough home equity to substantiate a new loan. Typically, most mortgage lenders require an 80% LTV (loan-to-value) ratio. This means that homeowners can apply to refinance a mortgage for up to 80% of their home’s value.

This is where home appraisals come in.

To determine the current market value of your home, a mortgage lender will typically require a  home appraisal.

A licensed home appraiser will evaluate comparable homes in the area along with recent home sales and write up a detailed report to confirm their findings.

Home appraisers serve as neutral third parties, so they don’t represent the homeowner or the mortgage lender.

Sounds easy enough, but if a home appraisal comes back with a lower value than anticipated, it can cause added stress and potentially cause a mortgage application to fall through.

Related: Find out how much you can save right now with this mortgage refinance calculator

How to Refinance a Mortgage Without an Appraisal

First, talk with a local mortgage advisor to verify your current type of mortgage.

When it comes to refinancing a mortgage, all home loans are not created equal.

If you have a government-backed loan, you could be eligible to skip the appraisal with a streamline refinance. For example, if you currently have an FHA loan, VA loan, or USDA home loan, you can typically refinance your mortgage without an appraisal. A streamline refinance establishes the new mortgage with the same type of loan and keeps costs down.

Related: Get started now with a qualified mortgage advisor in your local area

Second, ask your mortgage advisor about an appraisal waiver.

If you want to refinance your mortgage without cash-out, you could be eligible for an appraisal waiver through Fannie Mae. There are a few extra requirements, and it’s not always a fast process.

Third, find out if you’re eligible to use the AVM (Automated Valuation Model)

In the mortgage industry today, some mortgage lenders use the Automated Valuation Model (AVM) to estimate the current market value of a property. If you have over 30% home equity, you could be eligible to skip the home appraisal.

3 Top Loans to Refinance a Mortgage Without a Home Appraisal

1. FHA Streamline Mortgage Refinance – Home Appraisal Not Required

The FHA home loan is government-backed. If mortgage rates have dropped since you first closed on your mortgage, an FHA streamline can help you secure a lower mortgage rate (based on the current rates) and reduce your monthly mortgage payment.

Eligibility:

• present mortgage must be an FHA loan
• mortgage must be at least 210 days old
• on-time payments for the past 6 months are required
• must have no more than one late payment in the past 12 months
• homeowner must show a “net tangible benefit” to qualify

RELATED: When is it smart to refinance an FHA loan into a Conventional home loan?

2. VA Streamline Mortgage Refinance – Home Appraisal Not Required

Homeowners who currently have a VA loan are typically eligible. Also called IRRRLs (Interest Rate Reduction Refinance Loans), the VA streamline refinance loan doesn’t require proof of equity. Homeowners can also borrow up to 120% of their home’s value, as long as there is a net tangible benefit to the refinance. As a result, there is no appraisal required.

Eligibility:

• present mortgage must be a VA loan
• home must be your full-time residence
• current mortgage must be at least 270 days old
• on-time payments for the past 6 months are required
• homeowner must show a “net tangible benefit” to qualify

3. USDA Streamline Mortgage Refinance – Home Appraisal Not Required

Like other government-backed home loans, a USDA mortgage refinance typically doesn’t require a home appraisal. Therefore, homeowners who currently have a USDA loan are often eligible. In addition, a USDA streamline refinance loans doesn’t require proof of equity, so there is no appraisal required.

Eligibility:

• present mortgage must be a USDA loan
• current mortgage must be at least 12 months old
• on-time payments for the past 6 months are required
• homeowner must show a “net tangible benefit” to qualify
• homeowner must meet the USDA debt-to-income ratio required

RELATED: Learn the Truth About No-Closing Cost Loans

Summary

When it comes to getting a home appraisal, a lot of homeowners worry about the final number. What is my house worth? Will the home appraisal meet the criteria I need for a mortgage refinance? If my house appraises too low, should I wait and see if the market ticks upwards?

Skipping the home appraisal can streamline the process, save you money, and help you refinance a mortgage faster.

A no-appraisal refinance often costs less and requires less documentation. What’s more, a mortgage refinance without an appraisal will close faster than a standard mortgage refinance.

RELATED: How to refinance a mortgage when you’re self-employed

Taking Action

If you want to refinance a mortgage without an appraisal, connect with a local mortgage advisor to discuss your goals. The right home loan can help you build financial security and save money on your mortgage. There are several custom mortgage refinance options available for 2022. We’d love to help.