One of the most talked about developments in the real estate industry right now is Fannie Mae’s innovative decision to help you waive off appraisals in your refi process. Appraisal is one of the major phases involved in getting a home loan. It takes time, as you may have experienced when you first went through your home’s purchase. Typically, it takes 7 days to get the appraisal done. Thus, getting it off the checklist when you do your refi could cut down mortgage acquisition time.
Here’s more about what you should know about this Fannie Mae initiative.
Day 1 Certainty
In an announcement released December 12, Fannie Mae revealed its implementation of technology updates giving lenders the “freedom from representations and warranties on property value” for many loans as part of its groundbreaking Day 1 Certaintyinitiative.
The highlights of this initiative includes:
- a) DU Validation Services for Income, Assets, and Employment
- b) Collateral Underwriter for Greater Certainty; and
- c) Enhanced Property Inspection Waiver
What is Enhanced Property Inspection Waiver?
This part of the Day 1 Certainty benefits gives customers using the Desktop Underwriter an offer to waive off property inspection requirements for many refinancingtransactions. This reduces the cost of origination and therefore, shortens its processing time. This benefit took effect on December 10, 2016.
What is a conventional home appraisal like?
A home appraisal has three significant components. First, a professional appraiser will visit your home to conduct a physical examination and evaluation. This inspection will also be the basis for the repairs that need to be done before the parties can proceed on a sale. Second, the value of your home will be evaluated based on recent home sales in your neighborhood. Third, the appraiser does the report, which contains details of the valuation. This amount is fundamental in helping lenders determine how much you can borrow on a home loan.
If you’re applying for a VA or FHA loan, appraisals will proceed as they are and are completed in a week or less, contrary to the common myth that they take longer to process.
What does this Enhanced Property Inspection Waiver (PIW) mean for borrowers?
When you refinance with the Enhanced PIW, you could skip the appraisal part of the process which is typically required on most mortgages. This means hundreds of dollars on savings and faster loan processing.
Am I eligible?
To determine if you’re eligible, you must have:
- a) a Fannie Mae-approved loan you want to refinance
- b) a loan-to-value (LTV) ratio of no greater than 90 percent for primary and secondary homes – if your purpose is to lower your rate
- c) an LTV ratio of 70 percent for cash-out refis
- d) a 75 percent LTV ratio or lower on a rate/term transaction for investment properties; while a requirement of 60 percent LTV ratio for cashing out
This latest development in mortgage origination could significantly change the way mortgage lending is done. If you’re having difficulty determining your eligibility, ask a lending professional to guide you.