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Freddie Mac has begun offering an alternative to appraisals on certain types of purchase and refinance loans, moving to match their counterparts at Fannie Mae. This is great for clients because it means there’s one less hurdle to worry about when looking to purchase or refinance a home.

Fewer hurdles mean a smoother process for clients, which means a higher probability of getting to the closing table on time, which is key whether you’re buying or refinancing. We’ll go over the loans that qualify and what you need to know.

How Appraisal Waivers Work

Both Fannie Mae and Freddie Mac have automated underwriting systems. The idea is that once the loan data is collected, the system checks the application to see if clients qualify. This has two advantages:

  • The lending process is faster and more accurate with computers crunching the data in seconds
  • It frees up human underwriters to focus on loans that need their attention

On sites such as Zillow and Trulia, there’s more property data available than there ever has been. Freddie Mac and Fannie Mae have both begun to gather their own data regarding property values, which enables them to create appraisal waivers on qualifying loans.

This means when you submit your loan application, Quicken Loans runs your loan through both the Fannie Mae and Freddie Mac automated underwriting engines at the same time. If either one of those systems gives us the go-ahead to give you an appraisal waiver, we’ll use that one in order to get beyond the appraisal and move your loan process along.

Not every loan qualifies for an appraisal waiver, so let’s look at what qualifies.

Qualifying for an Appraisal Waiver

Both Fannie Mae and Freddie Mac have different systems that can be used for appraisal waivers in different situations – let’s break this down what this means.

Fannie Mae

For Fannie Mae loans, the main way you’ll get an offer to waive an appraisal is through a property inspection waiver. In order to get one, there are requirements.

Refinancing:

  • Must be a one-unit property (including for condos).
  • For a rate/term refinance on a primary residence or second home, you need at least 10% equity; 25% on investment properties.
  • For a cash-out refinance, you need 30% equity for a primary residence and 40% equity on a second home or investment property.

Buying:

  • Must be a one-unit property, (including condos).
  • You need at least a 20% down payment on a primary residence or second home. Investment properties aren’t eligible.

There are some restrictions for both purchase and refinance on property inspection waivers. New York and Kansas have restrictions in certain instances. Speak with a Home Loan Expert for details. In addition, all co-ops are ineligible. If an appraisal has already been done, that value is used.

Freddie Mac

Freddie Mac calls their appraisal waivers automated collateral evaluations. Their qualifications for if your loan has the possibility of a waived appraisal are a little more simplified than Fannie Mae.

The following are Freddie Mac requirements for an appraisal waiver. The home must be a one-unit property serving as a primary residence or second home, including condos. There are specific requirements for both purchases and refinances.

Buying:

  • You have to put at least 20% down.
  • It has to be an arm’s-length purchase transaction. You can’t purchase using a gift of equity.
  • The property can’t be bank owned at the time of the transaction.
  • If the property is new construction, an appraisal must be done.
  • If there any repairs affecting your ability to live within the property that are to be made as part of the purchase agreement, an appraisal will be done.

Refinancing:

  • If the property is being refinanced from a USDA loan, no waiver can be issued.
  • For a rate/term refinance to get a waiver, you need at least 10% equity.
  • For a waiver on a cash-out refinance, you need at least 30% equity on a primary residence and 40% equity left in the home on a vacation property.

As with Fannie Mae, there are limited instances in which you may get an appraisal waiver through a different program. When processing your loan, we’ll look at all options to ensure your loan process is as smooth as possible.

If you’re interested in refinancing your home or buying a new one, this could be one way to help simplify the process. If you’re ready to look into your options, get started online with Rocket Mortgage® by Quicken Loans. If you’d prefer to get started over the phone, you can talk to one of our Home Loan Experts by calling (800) 785-4788. If you have any questions, you can leave them for us in the comments below.

This Post Has 4 Comments

    1. Good morning, Matthew:

      As you can tell by the dateline on this article, it’s a couple of years old. That said, we just made a few changes and what you now see on the page should be up-to-date. If you would like to get started with a loan, you can do so online or give us a call at (888) 980-6716.

  1. Do not give permission to to do a hard inquiry on my credit report. It lowers my credit score and I’m working hard to get it higher. I have one loan and four credit cards and have not had one late or missed payment in over 18 months. I wish to take acquire a loan on my home for immediate necessary repairs and to pay off $10,000 credit card debt incurred due to retiring to care for my 92 yr old mother suffering from Alzheimer’s and a stroke.

    1. Hi Carolyn:

      We can certainly help you look into your options. However, there’s no reputable lender that will give you a home loan without at some point doing a hard inquiry on your credit report to verify your credit score as well as your debt-to-income ratio. They need to make sure you can afford the loan you’re getting and make sure you’re set up for the best possible chance of success. You can get a full refinance approval online through Rocket Mortgage or by speaking with one of our Home Loan Experts at (888) 980-6716. If your qualifications check out, there’s no reason you can’t get a loan. I just want to make sure appropriate expectations are set up front about the credit check.

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