How to Get Refinance Without an Appraisal
There are several ways to get refinance without an appraisal. Although most borrowers need an appraisal for their mortgage refinance, the following types of loans do not require an appraisal.
FHA streamline refinancing
Borrowers with an FHA loan can refinance their mortgage without an appraisal through a FHA Streamline refinancing. Refinancing grants borrowers the following benefits:
- Reduced interest rates: A lower interest rate can lower your monthly payment and save you money over the years.
- Extended Loan Duration: Refinancing can add up to 12 years to your loan, removing your monthly payment and providing financial relief.
- More affordable payments: A lower interest rate or longer loan term can lower your monthly payment, making your mortgage more affordable.
The paperwork required for an FHA Streamline refinance is minimal. Plus, you may qualify even if your home’s value has gone down. However, you will have to pay closing costs and your mortgage insurance premiums (MIP) will continue with the refinanced loan.
Also, you will need to be current on your mortgage with at least 6 months of payments made to qualify for an FHA Streamline refinance. You’ll also likely need a credit score of at least 580 and may need to meet certain debt-to-equity requirements. Finally, note that an FHA Streamline refinance is not a cash refinance, meaning you cannot use it to turn equity into cash.
Will streamline refinancing
A VA Streamline refinance allows eligible active duty military personnel with Department of Veterans Affairs (VA) mortgages to refinance their loans. Surviving military spouses may also apply. Service members need at least 90 days (consecutive or non-consecutive) of active wartime service or 181 continuous days of non-wartime service to qualify.
Refinancing your VA loan can guarantee lower interest rates and monthly payments. Borrowers will likely need a minimum credit score of 580 and a DTI that allows them to pay the mortgage payment. Additionally, your lender can build closing costs into the new loan if necessary, although this will increase the loan balance. Finally, as with FHA Streamline refinances, several factors, including the lack of an appraisal, make the refinance process fast.
The VA also offers cash refinance loans, allowing borrowers to turn their equity into cash. As a bonus, this refinancing can also reduce the interest rate. As a result, the two VA refinance options are interest rate reduction refinances.
Streamlined USDA Refinance
Borrowers with a United States Department of Agriculture (USDA) loan can use a USDA Streamline refinance to lower their monthly payments, lower their interest rates, or change the terms of the loan. You don’t need an appraisal or inspection to qualify, nor are there any strict credit or equity requirements.
USDA Streamline refinances are subject to the following conditions that borrowers must meet:
- The loan must be for your primary residence.
- This type of refinance is only for USDA loans, not for other types of mortgages.
- You can only refinance a loan that you have had for a year or more.
- You must show sufficient income for loan repayments and a satisfactory DTI.
- Your last 6 months of payments must be made on time.
Borrowers who obtain a USDA Streamline refinance can build closing costs into the new loan or pay them at closing. Additionally, you will have to pay a collateral fee, a fixed annual cost unique to USDA loans. Finally, the USDA Streamline refinance is not a cash refinance, which means that borrowers cannot use their equity to receive money from the refinance.
USDA Streamline-Assist Refinance
A second option for borrowers with USDA loans, USDA Streamline-Assist refinances are generally easier for borrowers to obtain due to the following requirements:
- The accommodation must be your primary residence.
- Refinancing is for USDA loans only.
- Your current USDA loan must be at least one year old.
- Borrowers must make 12 consecutive payments on their current loan.
- To be valid, the refinance must reduce your monthly payment by at least $50.
Borrowers do not need a credit score, income level, or DTI to qualify for a USDA Streamline-Assist refinance. Additionally, borrowers can skip appraisals and inspections altogether. Additionally, borrowers can add their closing costs to the new loan balance to avoid paying them upfront.
Automated Valuation Model (AVM)
Another alternative to an inspection is a automated valuation model (AVM). An AVM is a digital tool that estimates the value of your home by applying existing real estate data into a statistical model.
Unlike appraisers, who consider all current factors when appraising a home, AVMs only use information available in record systems. Therefore, AVMs are of no use if they cannot access updated information.
However, AVMs can give accurate estimates if they have the necessary information. Although AVMs can help you determine the value of your home, lenders generally won’t accept an AVM in place of a necessary home appraisal.