About Property Inspection Waiver Mortgage (PIW)
A mortgage that qualifies for an appraisal waiver, meaning when a loan can be approved without a full home appraisal report it is called a property inspection waiver (PIW) mortgage.
The two government-sponsored enterprises, Fannie Mae and Freddie Mac allow lenders to use existing data and run through an automated underwriting system to originate the mortgage without seeking a real estate appraiser’s feedback.
The Way to Qualify for a PIW Mortgage
If the borrower is buying a home or refinancing a mortgage, there are some government mortgage refinance programs that don’t require appraisals, property inspection waivers are applicable only on conventional mortgages.
With a property inspection waiver, the loan process will speed up and also save the borrower the cost for a full home appraisal report which typically costs around $300 or $400.
The type of appraisal waiver the borrower gets depends on whether the borrower is applying for a loan backed by Fannie Mae or Freddie Mac.
Fannie Mae property inspection waiver mortgage option is available on loans approved through the Desktop Underwriting (DU) automated underwriting system.
The automated collateral evaluation (ACE) appraisal waiver of Freddie Mac is offered through the Loan Product Advisor automated underwriting system.
When qualifying for an appraisal waiver the loan-to-value (LTV) ratio is the most important factor it is a measure of how much of the home’s value is the borrower borrowing.
For getting qualified for PIW, a borrower will either need to make a large down payment of at least 20% on a home purchase or they should have at least 10% equity in their home on a limited cash-out refinance.
A borrower needs even more equity for an appraisal waiver if they want to get more money than what they currently owe with a cash-out refinance.
The Eligibility Requirements for each type of Appraisal Waiver
PIW and ACE eligibility requirements:
The type of property can be One-unit properties or condominiums
Purchase Types:
Up to 80% of the home’s value for a primary residence and second homes
For Refinance:
Limited cash-out refinances for:-
Up to 90% LTV for principal residences and second home
Up to 70% LTV for investment properties
Cash-out refinances for:-
Up to 70% of the value for primary residences and
Up to 60% of the value for second homes and investment properties
Understanding Mortgage Appraisals
To understand a property inspection waiver one must first know what is a home appraisal? this appraisal determines how much is the home worth.
This appraisal is conducted by a licensed real estate appraiser who provides an unbiased assessment of the home’s value.
An inspection is done by the appraiser of the home’s interior and exterior condition, taking into account its design and features to determine its value compared to recent home sales in the area.
During the home buying process, an appraisal is conducted and lenders review them to ensure that the purchase price is correct and they calculate how much of the home’s value can be borrowed.
The borrower may also need an appraisal for a mortgage to refinance so the lender can confirm that the value is high enough to replace their current mortgage with a new one.
Pros and Cons of Property Inspection Waiver
Pros:
- The borrower can save money on the cost of the appraisal
- They don’t need to wait for the appraisal to be completed
- If they are refinancing they won’t have to refurbish the house for an interior evaluation
- They may be able to close on a purchase or refinance loan much faster
Cons:
- Homeowners won’t have a third-party opinion of their home’s value
- They will be relying on data collected from previous appraisers which may not be accurate now
- They could end up borrowing money on a house that’s priced too high
- They won’t have an up-to-date assessment of their home’s condition
Conclusion
A PIW mortgage is available for properties in high-needs rural locations, which are identified by the Federal Housing Finance Agency (FHFA).
These properties must be a principal residence with an LTV ratio of up to 97%. If they meet lending requirements then some borrowers with lower income can qualify for a PIW mortgage up to a 105% combined LTV ratio.
Even if one is eligible for an appraisal waiver, they can still request for a full appraisal if they feel like getting an appraisal.
If a borrower has any concerns about the value of the home they are buying, an appraisal report from a licensed real estate appraiser may be worth the extra expense to prevent them from overpaying for the home.
It is advisable to always get a home inspection for an in-depth look at the home’s condition.
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