New appraisal guidelines may make borrowing easier
Prior to the crash of 2007-2008, Fannie Mae and Freddie Mac had instituted a national value-tracking system in which all appraisals across the country were stored in a giant database that could be accessed by any lender to cross-check the valuation given by an appraiser. After a number of years of tracking this information, for certain transactions, they began to allow borrowers to use their internal valuation instead of requiring a new appraisal. After the crash, with real estate values plummeting in many areas, Fannie and Freddie abandoned the appraisal-waiver program, but in the past few weeks, Freddie Mac has reintroduced it. Below, Mark Wells at Preferred Financial Services answers questions about the appraisal-waiver program.
How can I find out if my purchase or refinance transaction can be done without having to pay for an appraisal? The only way to know for sure is for your mortgage broker to run your loan scenario through Freddie Mac’s LP (Loan Prospector) system. This automated underwriting system will determine whether or not you are eligible, and will issue the waiver. The final decision of LP cannot be overridden by a loan officer or underwriter.
Are there any general guidelines to indicate whether I might expect to get this waiver? Your loan must meet certain minimum criteria for a waiver to be considered. Among the ‘set in stone’ guidelines are that the property must be a single-family residence, used as a primary or second home, with a maximum loan to value of 80 percent. Townhouses are eligible but condominiums are not.
Why is the wavier not automatic if I meet those criteria? The LP automated underwriting system rates the risk of a loan across a number of parameters: credit scores, debt-to-income ratios, liquid reserves, job stability etc. Property value is just one of a number of risks to the lender. So in addition to the stated guidelines, LP must rate you as a lower-risk borrower overall to consider the waiver. Additionally, there may be some geographical areas where home prices have not stabilized enough for the historic valuation data to be valid. Upstate South Carolina is not one of those areas, but there are still pockets in the U.S. where home prices are still recovering from the crash.
Is Fannie Mae going to do the same thing as Freddie Mac? Not at this time. Only loans run through Freddie Mac can receive the appraisal-waiver designation.
So how do I know if my lender can get me to a Freddie Mac program? Your best bet is to use a mortgage broker rather than a bank or direct lender. Since mortgage brokers deal with many different lenders, they can identify those that fund their loans with Freddie Mac and put you with the right one. Many banks and direct lenders only work with Fannie Mae and will not have this option.
I operate a broker platform and have multiple Freddie Mac lenders.
I welcome questions and comments and can run your mortgage scenario through Freddie Mac’s LP system to let you know if you are eligible for an appraisal waiver.
I can be reached at 864-235-9596 or via email at Mark@TheGreatestRates.com.
Or Text Me Now! 864-430-4856
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