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Refinancing Assessment Exemptions Gain Popularity During Pandemic

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Refinancing a mortgage doesn’t happen overnight. There are several steps in the process, which is why it can easily take 30 days to close a refinance.

Once you’ve applied for a refinance, your lender will need to verify your financial details through a process called underwriting. After this step is complete, you will usually need your home to be appraised so that your lender can get an idea of ​​its market value.

But these days, an increasing number of refinance lenders are waiving the appraisal requirement. In fact, about two-thirds of refinances have a waiver, and one-third of withdrawals have one. And that’s actually a good thing for homeowners.

Why Are Lenders Forgoing Appraisals?

The purpose of an appraisal is to give the lender confidence that your home is worth at least the amount you want to borrow. That way, if you fall behind on your mortgage payments, your lender can rest easy knowing that if the foreclosure process were to begin, there’s a good chance they’ll get all of their money back.

Usually, an appraisal involves bringing an appraiser to your home and inspecting its characteristics and condition. Then, using this information coupled with housing market data, this appraiser will assign a value to your home. If you’re looking to refinance a $ 250,000 mortgage and your home is valued at $ 300,000, you’re ready to go. But if your home is only valued at $ 200,000, you will likely be turned down for a loan. The reason? If you were to default on your mortgage, your home wouldn’t be worth enough to have your lender paid off in full.

Now, you may find it surprising to learn that more and more lenders are forgoing appraisals given the state of the economy. But while the economy may be in bad shape, the housing market is another story.

Home values ​​have skyrocketed during the pandemic. In December 2020, the median price of a home sold was almost 13% higher than in December 2019, according to the National Association of Realtors. As such, many homes are likely to be appraised at a much higher price than they normally would, so lenders don’t care about the formal process.

Additionally, home assessments are a more precarious prospect during the pandemic. In an age where social distancing is key, many homeowners don’t want an appraiser to come inside to examine their living space. Lenders recognize this and waive valuations accordingly.

Of course, if you are not a particularly strong candidate for the loan, that is, you don’t have a good credit rating or have a lot of debt, then your refinance lender can. don’t let yourself get away with it as far as an appraisal goes. But if your lender forgoes this step, you can also save money in the form of reduced closing costs on your loan. In fact, when shopping for refinancing, pay attention to whether each lender you seek an offer from will require an appraisal. It may be to your advantage to favor a lender who does not.

A historic opportunity to potentially save thousands on your mortgage

There is a good chance that interest rates will not stay at multi-decade lows any longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger to buy a new home.

Our expert recommends this company for a low rate – and in fact he used it himself for refi (twice!). Click here to find out more and see your price. While this does not influence our opinions on the products, we do receive compensation from partners whose offers appear here. We are by your side, always. See our full advertiser disclosure here.

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