No-Appraisal Mortgage

DEFINITION of 'No-Appraisal Mortgage '

A type of home loan used for refinancing for which the lender does not require an independent opinion of the property’s current, fair market value. A no-appraisal mortgage does not consider for how much similar homes have recently sold or whether housing prices in the subject property’s local market are increasing, declining or flat.

BREAKING DOWN 'No-Appraisal Mortgage '

With a no-appraisal mortgage, the lender extends credit based on what the borrower owes on his or her existing mortgage. In the United States, no-appraisal mortgages are only used with refinance loans that help lower-income or financially struggling homeowners and with loans offered to qualifying current and former members of the military as a benefit of their service.

The four options for a no-appraisal mortgage are: 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 mortgages help homeowners who otherwise would not qualify for a refinance because their home has declined in value since they purchased it, causing them to owe more than the property is now worth. These refinances make it possible for such homeowners to lower their monthly payments and save thousands, perhaps tens or hundreds of thousands of dollars, in interest over the life of the mortgage. Some no-appraisal mortgages also do not verify the applicant’s income or employment status, making them helpful to homeowners who have lost their jobs or otherwise experienced a reduction in income.