What is an assessment exemption?


Find out if your home is eligible to forgo the appraisal process. (iStock)

A waiver of appraisal gives some potential buyers the option to decline the appraisal of their property. Not all homes are eligible to forgo the appraisal, but it can help save time and money.

Although this is called a waiver of assessment, it is actually a waiver of the traditional method of evaluate a house and depends on automated underwriting findings. Instead of someone coming for a walk around the property, the lender will use automated information based on data such as recent home sales in your neighborhood to get the appraised value.

Who is eligible for an assessment waiver?

While it would be nice if everyone qualified for an assessment waiver, it doesn’t. In reality, Fannie Mae said the majority of homes will not be eligible for the assessment waiver. However, your chances increase if you have a conventional loan tied to a single-family home or a condominium with one unit.

Ryan Dibble, COO of FlyhomesAt a minimum, borrowers must prove that they have an excellent credit rating and documentation that proves their assets. Properties must also meet specific loan-to-value (LTV) ratios and meet other loan requirements to be eligible.

Because it’s inconsistent and random as to which buyers and properties get appraisal waivers, some housing and mortgage experts have said it looks like a black box.

“Some buyers get valuation waivers on a property, but not a buyer or similar property. When our clients get an appraisal waiver, they feel like they are winning the lottery, but that only happens 10-20% of the time, ”said Dibble, who advises borrowers to work with a qualified mortgage lender. which can help them navigate the process.

Online market Credible can make this loan process easy and introduce you to some of the best mortgage lenders.

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Who offers assessment exemptions and why?

Lenders with qualifying loans for sale to government mortgage giants, Fannie Mae and Freddie Mac, offer the appraisal waivers. They started offering them to streamline the mortgage underwriting process by eliminating an extra step for borrowers. In addition, since the COIVD-19 pandemic, this translates into safety. A waiver of the assessment avoids having to send a living person to someone’s home.

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How do I apply for it?

To request an assessment waiver, check with your credit institution. It is important to point out that just because you can benefit from it, you have the right to request an assessment if you prefer to go the traditional route. A valuation waiver can be refused whenever the lender has a reasonable belief that an appraisal is necessary, Dibble said.

Credible can help you compare mortgage lenders and find the best rates available today so you can reach your financial goals.

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The positive and negative points of an assessment exemption

As with everything, there are pros and cons to getting an appraisal waiver, so experts advise borrowers to explore all options.

Advantages

Faster closing. Paloma Timothee, a mortgage processor with Residential mortgage inland, one of the advantages of the appraisal exemption is a shorter processing time for a mortgage loan. Dibble agreed and added that it takes time to plan the evaluation, bypassing the vendor’s and evaluator’s dueling schedules, and then extra time to get the results.

To save money. “An appraisal typically costs between $ 500 and $ 1,000, so the savings are significant,” Dibble said. Buyers are generally responsible for paying the appraisal. But with the waiver, it’s money you can keep in your pocket.

Relieve stress. Wait weeks to find out if you will be able to close to the house in case of low valuation is annoying. When that happens, Dibble said the buyer may need to bring additional funds to the closing table to cover the difference. “A waiver of valuation immediately takes the stress out of the transaction. This removes a volatile and disruptive component of a transaction for both the buyer and the seller, ”he said.

You can learn more about how the home loan process works. via Credible.

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The inconvenients

Undervalued or overvalued property. Borrowers may miss the opportunity to get a current market analysis on the property. “If the borrower decides to sell his property in the near future and uses the value given to the property by the underwriting engine, he runs the risk of under-selling his property,” said Timothy.

An evaluation possibility is present. A potential downside is a scenario where you have a funding and / or appraisal contingency in the contract. Dibble said under this circumstance, if the valuation is low, sellers can try to negotiate for a lower price.

The waiver can be canceled. Because Automated Underwriting Engines (AUS) determine whether an appraisal is required or can be waived, that waiver may be lost during mortgage processing, Timothy said. AUS is executed whenever there is a change in credit rating, income or assets, and these changes can affect the decision to grant or not to grant a waiver.

“If a waiver of appraisal conclusion is lost during the mortgage process, an appraisal must be ordered and the transaction will be delayed,” she said.

Further, Timothy added that the borrower should ask himself why he is refinancing, how long they plan to stay in the house, and if they are currently paying for mortgage default insurance. “Not getting an appraisal could be a missed opportunity to save more money,” she said.

However, with today’s interest rate at an all-time low, borrowers who want to save even more money want to know if they are eligible for the exemption.

But remember that appraisal is only a small part of the borrowing process. If you are thinking about refinancing or buying a home, it is a good idea to visit Credible for helpful advice and to get a mortgage. side-by-side comparison of current mortgage refinancing rights (especially when refinancing rates are low).

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