Do you need an appraisal to refinance?

Sometimes the computer says you can skip it

Fannie Mae runs every loan through its automated underwriting system. On some files, that system decides it already has enough data to trust the value you gave it. Fannie Mae calls that value acceptance. Most people still call it an appraisal waiver.

For refinances, Fannie Mae's published limits are:

• Limited cash-out refinance (the rate-and-term kind): up to 90% loan-to-value on a primary home or second home, and up to 75% on an investment property.
• Cash-out refinance: up to 70% loan-to-value on a primary home, and up to 60% on a second home or investment property.

Those are ceilings, not promises. Plenty of loans under those limits never get the offer. The system makes the call file by file, and it does not send a thank-you note explaining why.

Also, value acceptance is not offered if an appraisal for the home was uploaded to Fannie Mae's portal in the prior 120 days, or if the mortgage insurer wants an appraisal. And you can always ask for one anyway.

When you will still get an appraisal

If the waiver doesn't show up, you need an appraisal. Here is where people get confused, because there is more than one kind.

On a Fannie Mae loan, a desktop appraisal (no one visits the house) is purchase only. The Selling Guide lists all refinances as ineligible. So if you hear "we'll just do a desktop" on your refi, ask your loan officer which program they mean.

A hybrid appraisal is allowed on purchases, limited cash-out refinances and cash-out refinances. In the lender version, a trained third party, such as an agent, insurance inspector or appraiser, walks the house and collects the data. Then an appraiser who may never set foot inside writes the report from that data.

Hybrid is not available for everything. Fannie Mae excludes two- to four-unit homes, co-ops, manufactured homes and some construction loans, among others. Those files still get a traditional appraisal, where the appraiser inspects the house in person.

If your house has a quirky floor plan, a big addition, or a backyard cottage, expect a real appraisal. Computers love tract homes. They get nervous around a converted barn.

Can you reuse the appraisal from when you bought?

Sometimes, but the window is narrow. Fannie Mae lets a lender reuse the origination appraisal only when all of these are true:

• The new loan is a limited cash-out refinance. Cash-out does not qualify.
• The borrower and the lender are the same on both loans.
• The appraisal is less than 12 months old on the new note date.
• Nothing like a remodel or deterioration has changed the home's value in a material way.

If the original report is more than four months old, it also needs an appraisal update. That is a separate form where the appraiser looks at the outside of the house and checks whether the market has dropped. If the value went down, you need a new appraisal.

So the buyer who closed in March and wants to drop their rate with the same lender in July might get lucky. The buyer who switched lenders, or wants cash out to fund a pool, is ordering a new one.

FHA and other loan types play by their own rules

An FHA streamline refinance can be done without an appraisal. When it is, HUD's Mortgagee Letter 2013-04 says FHA uses the original appraised value to figure your loan-to-value. Your home may be worth far more today, and FHA will not care. On a streamline, that is fine, because the goal is a lower payment, not a value check.

Non-QM loans, private money and jumbo loans follow whatever their investor requires. Many of those programs still want a full appraisal on every file, and some want two. Ask early, so you are not surprised two weeks before your rate lock runs out.

One more thing that trips people up: the appraisal for a refinance is ordered by the lender, for the lender. It does not matter how nice your neighbor's sale was. The appraiser is measuring the market, not your hopes. Facts over feelings works in both directions.

What I tell homeowners before they refinance

From the appraiser's chair, the refinances that go sideways are almost always the ones where the owner picked a value out of thin air. A Zestimate is not a value. Neither is what your cousin got for a house with a pool and a view.

Before you apply, do these things:

1. Ask your loan officer whether the file is likely to get value acceptance, and what happens if it doesn't.
2. Ask which appraisal type they will order: traditional or hybrid. Know that a lender desktop is not an option on a Fannie Mae refinance.
3. Pull your own numbers. Look at closed sales of similar homes nearby from the last few months, not the listing prices.
4. List your upgrades with dates and permits: roof, windows, kitchen, HVAC, solar. Hand it to the appraiser if there is one.
5. Think about your loan-to-value cushion. If you need the value to hit an exact number to make the loan work, you are running a tight race.

If you want to know where the value really sits before you lock, a private appraisal or consultation can give you an evidence-based read. At ValuedAudit, a desktop or hybrid appraisal is the same product: no site visit, you share what you know and any photos, and I work from records and market data. It will not replace the lender's appraisal, but it tells you whether your plan has room to breathe.