Using a New Appraisal

A new appraisal gives the lender a current value for your home. On a refinance it sets your loan-to-value ratio, which decides your pricing, how much cash you can take out, and whether you can drop mortgage insurance. Some refinances skip a full appraisal, but that depends on the program and the lender.

When is a new appraisal needed?

An appraisal is an independent professional opinion of your home’s market value. For most refinances, the lender orders one through an appraisal management process so the appraiser is independent of the loan officer. You will typically need one when:

• You want a cash-out refinance, since the loan size depends on value.
• You are doing a rate-and-term refinance and the lender requires value to confirm LTV and mortgage insurance.
• You want to prove enough equity to remove PMI by refinancing.
• You are moving from an FHA or VA loan into another program that requires a full valuation.

Are there refinances without an appraisal?

Sometimes. A few categories can skip a full appraisal:

• Streamline refinances. The VA IRRRL generally does not require an appraisal in most cases, and FHA streamlines often have reduced requirements. See VA IRRRL and FHA streamline refinance requirements.
• Appraisal waivers. Fannie Mae and Freddie Mac automated underwriting may waive the appraisal for some eligible loans, usually where the data in their systems already supports the value. The system decides, not the borrower or the loan officer, and waivers are never guaranteed.

Even when a waiver is offered, the value used may be lower than you hope, since it often relies on the existing record rather than your improvements. If you made upgrades you want counted, you may choose to pay for an appraisal. Ask your loan officer whether that is possible for your loan.

How does the new value affect my loan?

It sets your loan-to-value ratio

LTV is your new loan amount divided by the appraised value. A lower LTV generally means better pricing and fewer limits.

It controls cash out

For a conventional cash-out refinance on a primary residence, the maximum loan is generally about 80% of the appraised value. FHA cash-out is also up to 80%. VA allows up to 100% of reasonable value, though many lenders cap lower. See cash-out refinance.

It can remove mortgage insurance

PMI on a conventional loan generally ends when you reach 80% LTV through a refinance. If you hold a conventional loan with PMI, you can also ask your servicer to remove it once you reach 80% of the original value, or after a value increase using a new appraisal, subject to the servicer’s seasoning and payment-history rules. The PMI guide covers both paths.

What if the appraisal comes in low?

A low value reduces your options but does not always end the refinance. You can usually:

1. Ask your loan officer to review the report for factual errors, such as wrong square footage or missing improvements.
2. Provide recent nearby sales that the appraiser did not use. A formal reconsideration of value request may be possible.
3. Reduce the loan amount, skip the cash out, or bring cash to close to meet the LTV limit.
4. Wait and try again after the market or your improvements change.

Do not assume a different appraiser will give a higher number. Repeated appraisals cost money, and the lender decides which valuation to use.

How to prepare for the appraisal

• Make a list of upgrades with dates and costs, such as a new roof, an addition, a kitchen remodel or a permitted accessory dwelling unit.
• Clean and declutter. Fix visible defects such as broken windows or leaks.
• Make sure the appraiser can access every area, including attic and garage.
• Gather comparable sales from the last few months in your neighborhood.
• Be home or have a representative ready to answer questions.

How do waiting periods and appraisals relate?

Rules about how soon you can use a new value after buying differ by program and lender, and lenders may add their own. For example, a lender may want a gap between a purchase and a new appraisal used to prove a big value jump. For the general seasoning picture, see when you can refinance and the cash-out timeframe.

At Lendia, we help you decide if the appraisal is worth ordering

At Lendia, we tell you up front which options need an appraisal, which may not, and what a low or high value would change. Contact us or get a rate quote now.

Frequently Asked Questions

How much does a refinance appraisal cost?

The fee depends on the property type, size and location, and it is disclosed on your Loan Estimate. Complex or large properties generally cost more.

Can I use an online home value estimate?

Lenders do not accept an online estimate as final. It can help you plan, but the appraisal or waiver decision determines the value.

Will an appraisal waiver lower my rate?

Not by itself. A waiver saves time and cost, but pricing depends on LTV, credit and other factors.

What if I disagree with the appraised value?

Ask your loan officer about a reconsideration of value with supporting comparable sales. Results vary and are not guaranteed.

Do I need an appraisal to remove PMI?

Sometimes. If you request removal at 80% of the original value, an appraisal may not be required. If you rely on a new value to show higher equity, expect one.

Rates and terms depend on your situation; approval requires qualification.