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Property Inspection Waivers for VA, FHA, and Conventional Loans in Florida

Can you obtain a Mortgage Loan without an Appraisal? The answer is yes. With a PIW (Property Inspection Waiver) Mortgage, you can secure a home loan without the need to spend hundreds of dollars on a home inspection.

During the home buying process, part of the underwriting procedure involves ordering a home appraisal. However, a program called the "Property Inspection Waiver" has been introduced in recent years.

This program allows you to obtain mortgage approval without requiring an appraisal. It is accessible to both first-time home buyers and individuals seeking to refinance their mortgage under specific circumstances.

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In this article, we will explore the process of obtaining an appraisal waiver and the reasons why you might consider opting for this option.

How PIW's Work in Florida

The waiver program was introduced in Florida back in 2017, initially by the government-sponsored enterprise (GSE) Fannie Mae and later extended to include Freddie Mac.

In the Sunshine State, the program applies exclusively to conventional mortgage loans for property purchases, offering certain borrowers and properties the opportunity to obtain a new mortgage without undergoing a full appraisal report.

When it comes to refinances, specific conventional loans may also qualify for a Property Inspection Waiver (PIW).

Additionally, homeowners seeking to refinance and holding VA, USDA, or FHA-backed loans might be eligible for streamlined refinance programs, which could bypass the need for a traditional appraisal.

Florida's Property Inspection Waiver offerings are facilitated through an automated underwriting system (AUS) that relies on computer calculations with minimal human intervention.

This AUS evaluates several factors such as income, employment history, credit, and assets, essential for lenders to originate mortgages, while also utilizing existing property data without consulting an appraiser.

This feature proves particularly beneficial in regions like Florida, where the real estate market has experienced significant demand that outstrips supply, leading to a backlog of appraisal orders.

The primary factor that determines eligibility for a PIW in Florida is the loan-to-value (LTV) ratio of the borrower.

To qualify for a PIW, borrowers often need to make a substantial down payment of at least 20% for property purchases or have accumulated at least 10% equity in their homes for refinances.

For those interested in a cash-out refinance to access funds exceeding their current mortgage balance, an even higher level of equity in the property is required to be eligible for a PIW in Florida.

FHA, VA, and Conventional Property Inspection Waiver Eligibility

Federal Housing Administration (FHA), Veterans Affairs (VA), and United States Department of Agriculture (USDA) loans typically do not offer appraisal waivers. However, there are exceptions for certain programs:

  • FHA Streamline - No appraisal is required.

  • VA - IRRRL (Interest Rate Reduction Refinance Loan) - No appraisal is required, except for certain fixed-to-arm refinances.

  • USDA - Refinance streamlined and streamlined-assist - No appraisal is required, except for Direct 502 loans.

For loans backed by Fannie Mae and Freddie Mac, appraisal waivers (AW) or automated collateral evaluations (ACE) may be available for the following types of properties and transactions:

  • One-unit properties, including condominiums.

  • Limited cash-out refinance transactions with certain loan-to-value (LTV) and combined loan-to-value (CLTV) ratios for primary residences, second homes, and investment properties.

  • Cash-out refinance transactions with specific LTV/CLTV ratios for primary residences, second homes, and investment properties.

  • Purchase transactions for principal residences and second homes with up to 80% LTV/CLTV ratios.

Appraisal waivers may also be available for properties in high-needs rural locations, as identified by the Federal Housing Finance Agency (FHFA), subject to specific requirements, LTV/CLTV limits, and contingent on a mandatory property inspection.

However, there are certain types of loans and properties that are ineligible for appraisal waivers, such as:

  • Construction and construction-to-permanent loans.

  • Properties with two to four units.

  • Properties valued at or purchased for over $1 million.

  • Properties with resale price restrictions, cooperative units, and manufactured homes.

Property Inspection Waivers (PIW) may also be considered for certain loans, but borrowers should follow the guidelines provided by the respective agencies or investors.

Homebuyers should be aware of the loan programs they qualify for and discuss the potential for appraisal waivers or property inspection waivers with their mortgage lender.

It's essential to understand that some loans may still require an appraisal or property inspection, depending on the loan product and specific circumstances.

Pros and Cons of Property Inspection Waivers

To begin with, in Florida, the decision to approve a Property Inspection Waiver (PIW) is not left to the underwriter or Loan Officer; it's solely determined by the automated underwriting system (AUS), removing any potential subjective influence.

The process incurs no additional fees, and there's no need for extra paperwork, as the previous requirement for a PIW form has been eliminated.

Considering the advantages of opting for a property inspection waiver in Florida, the foremost benefit is the cost-saving aspect, as it eliminates the need for a full appraisal.

Another significant advantage is the time saved, as there's no waiting for the appraisal to be completed, reducing anxiety and uncertainty during the transaction.

For homeowners doing a refinance, receiving a PIW approval means they don't have to prepare their property for an appraiser's visit, resulting in further time savings.

Additionally, not waiting for an appraisal can expedite the closing process for both purchase and refinance transactions.

The benefits of a PIW largely depend on the specific transaction type, the time available for the process, and the individual's current life circumstances.

However, there are potential drawbacks to consider when choosing a property inspection waiver in Florida. First and foremost, not obtaining a third-party opinion on the home's value might be seen as a disadvantage.

Relying solely on data from a previous appraiser's report may not accurately reflect the current value, especially if significant updates or market fluctuations have occurred.

For instance, homeowners who have made substantial improvements to their property might prefer a new appraisal to ensure accurate comparable sales.

Additionally, in a volatile market, having an up-to-date appraisal can help avoid overborrowing on a potentially overpriced home.

Lastly, by forgoing an appraisal, the most recent assessment of the home's condition may not be available, potentially leaving some uncertainties about its current state.

How to Qualify for a Property Inspection Waiver

A Property Inspection Waiver (PIW) can be an appealing option for borrowers looking to save time and money during the mortgage process.

However, not everyone is eligible for this streamlined approach. To qualify for a PIW in Florida, certain criteria must be met, with the Loan-to-Value (LTV) ratio playing a pivotal role.

The LTV ratio is a crucial factor in determining eligibility for a PIW. It assesses the percentage of the home's value that the borrower is seeking to borrow through the mortgage.

To qualify for a PIW, Florida borrowers generally need to meet one of the following conditions:

  • Purchase Transactions - If you're in the process of buying a property in Florida, you'll typically need to make a significant down payment of at least 20% of the property's purchase price.

  • Refinance Transactions - For homeowners seeking to refinance their existing mortgage in Florida, you'll need to have built up a minimum of 10% equity in your home.

The LTV ratio is closely tied to risk assessment in mortgage lending. Lenders prefer lower LTV ratios as they indicate a more substantial stake by the borrower, reducing the risk of default.

Higher LTV ratios, on the other hand, signify a higher percentage of borrowed funds relative to the home's value, which may increase the risk for the lender.

As a result, borrowers with a lower LTV ratio are more likely to qualify for a PIW, given the perceived reduced risk associated with their loan request.

When you apply for a mortgage in Florida, the automated underwriting system (AUS) will evaluate your financial details and the property's information to determine if you meet the eligibility criteria for a PIW. The AUS considers factors like income, credit score, assets, employment history, and the LTV ratio.

If your application meets the specific requirements, the AUS may grant you a PIW approval, allowing you to proceed with your mortgage process without the need for a full appraisal.

Credit Score for Appraisal Waiver

In the realm of mortgage lending, credit scores play a significant role in determining a borrower's eligibility for various loan options, including the coveted Appraisal Waiver.

When seeking this streamlined process, it's essential to be aware of how your credit score can influence the likelihood of approval.

Generally, lenders prefer a credit score of at least 740 to qualify for this convenient option.

A credit score of 740 or higher demonstrates a strong credit history and financial responsibility, which can boost the borrower's credibility in the eyes of the lender.

Having a high credit score indicates a lower risk of default, making the lender more willing to waive the appraisal requirement.

Does the VA Give Appraisal Waivers?

The Department of Veterans Affairs (VA) has specific guidelines regarding appraisal waivers.

While borrowers cannot waive VA appraisals entirely, the VA does consider requests to waive Minimum Property Requirements (MPR) repairs under certain conditions.

Here are the conditions under which the VA may consider waiving MPR repairs:

  • Request Signed by the Veteran Borrower - To initiate a request to waive MPR repairs, the Veteran borrower must sign the request. This means that the borrower acknowledges the condition of the property and is willing to proceed without requiring specific repairs mandated by the VA's Minimum Property Requirements.

  • Lender Agreement - The lender involved in the transaction must also agree with the Veteran borrower's request to waive MPR repairs. This ensures that all parties involved are in consensus and aware of the decision to proceed without the necessary repairs outlined by the VA.

  • Habitable Property - The property must be deemed habitable from the standpoint of safety, structural soundness, and sanitation. Even if some MPR repairs are not addressed, the property must meet minimum safety and livability standards to be eligible for the waiver.

While the VA may consider waiving certain MPR repairs under the conditions mentioned above, it's important to consult with the lender and be aware that not all repairs can be waived.

Ultimately, the decision to grant an MPR waiver lies with the VA, and the property's habitability and safety are of utmost importance in this process.

Are Appraisal Waivers a Bad Idea?

Appraisal waivers can be a beneficial option for some buyers, as they offer cost savings on appraiser fees and can expedite the closing process.

The automated calculations used in appraisal waivers also eliminate potential bias or subjectivity that can be present in a traditional appraisal.

However, there are potential drawbacks to consider. Without an appraisal, lenders and borrowers might not have a comprehensive understanding of the property's current market value, potentially impacting financing decisions.

The waivers also focus on certain factors like credit score and loan-to-value ratio, overlooking the property's physical condition, which could lead to missed issues or needed repairs.

Additionally, lenders take on more risk with appraisal waivers, which might result in stricter lending terms or higher interest rates for borrowers.

Ultimately, borrowers should assess their specific situation, market conditions, and risk tolerance before deciding on an appraisal waiver.

Consulting with a qualified mortgage professional can provide valuable insights to make an informed decision.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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