Buying a home without an appraisal

While appraisals are usually a requirement, Fannie Mae is waiving this mandate for certain transactions. This waiver, called a Property Inspection Waiver (or PIW), is allowed on purchases and rate and term refinances. (Photo: Pixabay)

Michaela Phillips, Guaranteed Rate, Inc.

Michaela Phillips,
Guaranteed Rate, Inc.

BOULDER – For most homeowners, an appraisal is part of the buying and selling process. The reason for this is a financial one: a home serves as collateral in the event a buyer defaults on their mortgage. Therefore, lenders don’t want people to overborrow and pay more than a home is truly worth. Doing so leaves them at risk of losing money.

But, while appraisals are usually a requirement, Fannie Mae is waiving this mandate for certain transactions. This waiver, called a Property Inspection Waiver (or PIW), is allowed on purchases and rate and term refinances. Yet a PIW isn’t guaranteed – the automated underwriting system employed by Fannie Mae and Freddie Mac bases its PIW decision on the strength of the borrowers. For people who are refinancing, the program has extra limitations; borrowers must have at least 20 percent in equity and can’t take out cash.

Any buyer allowed to forgo an appraisal benefits here. Appraisals can cost hundreds of dollars, accrue additional costs at closing, and force borrowers to take responsibility for the accuracy of home valuations. This makes PIW a waiver appealing to anyone searching for property.

This isn’t the first time PIWs have surfaced as part of the home buying experience. They existed in the early 2000s until the 2008 Housing Market Crash. They were suspended then, not surprisingly, but, as the market continues to flourish, they’re becoming more common.

It’s worth noting that PIWs don’t apply to jumbo loan transactions. A jumbo loan is a type of loan that exceeds the regulated limits. These loans are available to people purchasing in areas where the cost of housing is considered especially high (such as various locations in Denver or Boulder). It doesn’t apply to this type of loan because they’re not backed by Fannie Mae or Freddie Mac.

If you’re in the process of buying a home or refinancing one you already own, you may qualify for a non-appraisal waiver.

By Michaela Phillips, Guaranteed Rate, Inc. Michaela Phillips is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail michaela@michaelaphillips.com or visit michaelaphillips.com. NMLS:312874.