skip to main content



How do Appraisal Waivers Impact a Home Mortgage Application?

May 22, 2024

appraisal waiver

In today’s fast-paced real estate market, buyers are looking for ways to streamline the process and gain an edge when buying a home. Appraisal waivers can offer that edge and are becoming increasingly common, but understanding their benefits and implications is essential.

Appraisal waivers are a result of advancements in technology and data analysis, allowing lenders to confidently waive the appraisal requirement based on accurate market data and the buyer’s financial profile. By utilizing this innovative approach, buyers can eliminate delays caused by the traditional appraisal process and accelerate the closing time.

In this article, we will explore the benefits and limitations of appraisal waivers in real estate transactions. We’ll examine the factors that influence eligibility for an appraisal waiver and discuss scenarios in which they may be suitable. Additionally, we will speak to how it may help get buyers under contract, making the mortgage application process easier, and offer insights into the potential risks and drawbacks of relying solely on an appraisal waiver.

Whether you’re a buyer, seller, or real estate professional, understanding appraisal waivers can help you navigate the complexities of real estate transactions efficiently and confidently. So, let’s delve into the world of appraisal waivers and unlock their benefits.

What is an appraisal waiver?

An appraisal waiver, or a Property Inspection Waiver (PIW), is an agreement between a lender and a home buyer or refinancer that allows them to forego the traditional in-person appraisal process.

There are two primary systems that process mortgage application data and determine whether an appraisal waiver is possible. Fannie Mae has a Collateral Underwriter (CU), and Freddie Mac has an Automatic Collateral Evaluation (ACE).

Both Fannie and Freddie have enormous mortgage portfolios and carry extensive databases supporting home valuations and performance.

By leveraging their data, mortgage lenders can save time and money for the consumer.

How is an appraisal waiver obtained?

The specific mortgage application must be eligible, and the decision to waive the appraisal requirement is based on the buyer’s financial profile and the loan-to-value ratio. There also needs to be enough information available about the property. If the lender determines that an appraisal waiver is appropriate, the buyer can move forward with the homebuying process more quickly and efficiently.

Loans must be for owner-occupied, single-family residences (excluding manufactured) in urban to suburban areas. The mortgage loan purposes are the purchase of a new home or rate and term refinances. Cash-out mortgage applications cannot obtain a PIW.

Past that, Fannie and Freddie don’t necessarily disclose the specific criteria that do and don’t get a waiver. However, it’s clear that the lower debt-to-income ratio, high equity, and high credit scores greatly affect the chances of getting a PIW.

From the feedback we observe, the availability of data for neighboring homes also seems to play a part in obtaining a waiver.

How does a property inspection waiver help buyers?

From the buyer’s perspective, it lowers the cost and time to close. It can also be a relief that the subject property is being sold for a price supported by data.

From a seller’s perspective, it can also help to know that valuation will not be a concern when selling their property.

While appraisal waivers offer convenience and potential cost savings, they also come with their own set of pros and cons. Understanding these can help buyers make an informed decision about whether to pursue an appraisal waiver.

Pros of using an appraisal waiver

  1. Time savings: Appraisal waivers can significantly reduce the time it takes to close on a home. Buyers can expedite the transaction by skipping the traditional appraisal process and move into their new home more quickly.
  2. Cost savings: Traditional appraisals can be expensive, ranging from several hundred to several thousand dollars. By waiving the appraisal, buyers eliminate this cost, potentially saving a significant amount of money.
  3. Reduced risk of appraisal issues: With an appraisal waiver, buyers rely on the lender’s valuation, reducing the risk of discrepancies between the appraised value and the purchase price. This can simplify negotiations and reduce the chances of deal fallout.

Cons of using an appraisal waiver

  1. Limited negotiation power: By waiving the appraisal, buyers accept the lender’s valuation as the true worth of the property. This can limit their ability to negotiate a lower purchase price based on a lower appraisal value.
  2. Potential overpayment: Without an independent appraisal, buyers may find themselves paying more for a property than it is worth. This can impact their long-term financial situation and equity in the home.
  3. Limited recourse in case of issues: If issues related to the property’s value arise after closing, buyers may have limited recourse since they waived the appraisal. This could potentially lead to financial consequences if the property’s value is significantly lower than expected.


Is an appraisal waiver the same as an appraisal contingency waiver?

We break down whether you should waive the appraisal contingency on your offer when purchasing a home, but it’s important to know the two things are different. Waiving the appraisal contingency does not mean there won’t be an appraisal—it just waives the clause that allows you to back out of a deal when the appraisal results come back.

Both can be useful when making offers on a home. Your loan advisor can walk you through your options to help you make your offer competitive while also keeping your home-buying journey smooth and problem-free.

Is an appraisal waiver right for you?

Appraisal waivers or Property Inspection Waivers are great tools for helping borrowers get mortgages approved with less cost and more speed. They can also reassure sellers that the home is being sold at a fair price.

Make sure to consider the pros and cons, eligibility requirements, and the potential implications of waiving an appraisal. Consult with a real estate professional and mortgage lender to provide valuable insights and guidance to make an informed decision. Whether an appraisal waiver is right for you depends on your individual circumstances and priorities. At Homestead Financial Mortgage, we can help you determine the best approach to streamline your homebuying process and make your dream home a reality.

"By being open and recognizing our strengths and weaknesses, we can see opportunities for growth and ways to help each other."

- CEO, Jayson Hardie on Growth

Get a Free Quote →