Fannie Mae has made the announcement that there are changes coming to the eligibility requirements for a value acceptance (also known as an appraisal waiver.) The changes are part of an initiative to balance the need for a traditional appraisal vs. alternative methods for determining a property value during a purchase or refinance.
An appraisal waiver is granted when both the property being purchased or refinanced and the buyer qualify to forego a traditional appraisal. Historically, in order to obtain an appraisal waiver you need to have a 20% down payment or 20% equity in the property to qualify. The announcement Fannie Mae made will transition the minimum requirement down to a 10% down payment on purchases. This change is anticipated to go into effect in Q1 of 2025.
What is an Appraisal
An appraisal is a report that is completed when you are buying or refinancing a home. The lender will need to ensure that the price you have agreed to pay is equal to or less than the value of the property. An appraisal contingency is often written into the offer to buy the property. This protects the buyer and guarantees value. The value is determined by hiring an appraiser to go out to the property and do a complete appraisal report.
The appraisal is completed by an independent appraiser. The report will evaluate the home against recent sales data and the appraiser will select transactions of the most similar homes to represent the current market value of the home. If the appraisal comes in below the agreed upon sales price, buyer and seller may renegotiate the terms of their purchase agreement and/or changes to the loan terms.
In the Upper Valley an appraisal can cost the buyer roughly $700-$800 but sometimes more for unique properties. Obtaining an appraisal waiver saves the borrower that money.
Understanding an Appraisal Waiver
When you are buying a home with the help of a mortgage you will be required by your lender to obtain an appraisal. Appraisals are ordered by the lender through an independent third party. This fee can be rolled into your mortgage loan. When you are purchasing a home your lender can check and see if that property qualifies for an appraisal waiver.
Typically to secure an appraisal waiver you will need a strong credit score of 740+ and be obtaining a loan through Fannie Mae or Freddie Mac. The property you are purchasing needs to be a single-family home or a condo that is in good condition and a location or neighborhood with recent sales is a must.
A down payment of 20% is currently required to get an appraisal waiver however the news from Fannie Mae indicates that this will now be possible with a 10% down payment in 2025.
Appraisal Waiver Changes
Through the end of 2024 appraisal waiver requirements will stay the same and we expect to see the change go into effect in Q1 of 2025. There is not a firm date on the timing of the change. With the expense of buying a home in today’s market the change from a 20% down payment to a 10% down payment requirement will be a big help for a lot of buyers. Saving the expense of an appraisal is great and will allow for a fast and simple loan process. If you are buying a home in today’s real estate market contact the Legacy Mortgage team to find out if the property you’re looking at qualifies for an appraisal waiver.
The Legacy Mortgage team collectively boasts over a 135 years of industry experience and is well versed in a variety of loan programs including fixed mortgages, ARMs, VA loans, FHA, first time homebuyer and more! We have the privilege of partnering with the best local agents, appraisers and attorneys the Upper Valley has to offer. When you work with Legacy Mortgage you are working with the best local professionals from beginning to end. Reach out to the Legacy Mortgage team to get the loan process started. Call us today, 603-643-7400.