No-Appraisal Loan

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DEFINITION

A mortgage that does not require an appraisal of the property’s current market value. A no-appraisal loan may use alternative methods of determining a home’s value for the purpose of defining how much money to lend, or it may not require professional assessment of the home’s current market value, just information on the borrower’s loan balance.

INVESTOPEDIA EXPLAINS

Most mortgages do require appraisals. Some examples of no-appraisal loans include the FHA streamline refinance, for homeowners who have existing Federal Housing Authority mortgages and want to refinance into another FHA loan; the Home Affordable Refinance Program (HARP), for borrowers with conventional mortgages owned by Fannie Mae or Freddie Mac who are struggling to afford their monthly payments; the USDA streamline refinance, sometimes used in rural areas, for borrowers who want to refinance their existing U.S. Department of Agriculture loan into a new USDA loan; and Veteran’s Administration streamline refinances, officially called VA Interest Rate Reduction Refinance Loans (IRRRL), for qualifying U.S. military service members refinancing an existing VA loan into a new VA loan.

No-appraisal loans have several benefits for homeowners. They save the homeowner several hundred dollars that they would normally have to pay an appraiser, they eliminate a potentially stressful step from the home-financing process, and they also make it possible, in some cases, to refinance a mortgage even when the homeowner is underwater (the home's value drops below the loan amount). Without a no-appraisal loan, these homeowners would be ineligible to refinance.


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