What Is a No-Appraisal Refinance?

A no-appraisal refinance occurs when a lender waives the home appraisal and approves your refinanced mortgage without an in-person inspection. Not every lender offers this, and it only works in some instances, depending on the lender and the type of loan you have.

Definition and Example of a No-Appraisal Refinance

A no-appraisal refinance happens when a bank or lender approves a refinanced mortgage without conducting an appraisal of the home first. An appraisal is an inspection of the home and research on other homes in the area to determine the fair market value of your property.

When you refinance your home, you take out a new loan to replace your existing one. With your original loan, the bank completed an appraisal of your home to see how much it was worth. Lenders usually request a home appraisal to make sure you’re borrowing as much as your home is worth. Many lenders want to know what your home value is before approving your new loan.

But when you refinance your home, you might not need to get an appraisal. In some situations, you can skip the appraisal process altogether.

• Alternate names: FHA Streamline, IRRRL for VA loans, USDA Streamline

For example, if you used a loan from the Department of Veterans Affairs (VA) to finance the purchase of your home, you might be able to refinance using an interest rate reduction refinance loan (IRRRL). This loan could help you get a lower interest rate or move from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. The VA does not require an appraisal or a credit check for an IRRRL loan.

How Does a No-Appraisal Refinance Work?

Each loan has its own set of requirements, depending on the type of loan you have and the lender.

Federal Housing Administration (FHA) Streamline Loan

You can refinance your current FHA loan with little credit documentation and underwriting. You must be current on your loan to qualify. While the process is streamlined, you’ll still need to pay the costs and fees that go along with refinancing your loan, even if an appraisal isn’t included.

Interest Rate Reduction Refinance Loans (IRRRL)

If you already have a VA-backed loan on your primary residence, you might qualify for an IRRRL to refinance your loan. While most IRRRLs don’t require an appraisal, lenders may request it in some instances. Check out each lender to see if you’ll need one before completing a refinancing application.

U.S. Department of Agriculture (USDA) Streamline Loan

This refinancing option is only available for current USDA home loan borrowers. There’s no appraisal, no credit check, no home inspection, and no debt-to-income ratio (DTI) verification. You’ll need to be current on your loan payments and show that you’ve made at least 12 monthly payments on your home to qualify.

Conventional Loan Appraisal Waiver

If you have a conventional loan, you might be able to get an appraisal waiver, which removes the in-person appraisal step. Instead, lenders will use an automated underwriting process to review and research the value of the home, including nearby and similar homes. If your home was recently appraised, lenders may waive this appraisal. You might also qualify for a waiver if you can prove you can financially afford your new mortgage payments.

Do I Need a No-Appraisal Refinance?

No, you don’t have to refinance your home with an appraisal. And not everyone is eligible for a no-appraisal refinance. In some cases, you might want a home appraisal. For example, if you want to ditch private mortgage insurance (PMI) once you have at least 20% equity in your home, you should probably get it appraised first.

If you refinance your home and eventually fail to pay your loan back, the lender must sell your home. And if the value of your home dropped, the lender may have to sell your home for less than what they paid for it, causing them to lose money.

You might want a no-appraisal refinance if you’re struggling to afford your mortgage payments right now and looking to lower your interest rate.