What You Should Know About a PIW Mortgage
A property inspection waiver (PIW) mortgage is a mortgage that’s eligible for an appraisal waiver, which means the loan can be approved without a full home appraisal report. Fannie Mae and Freddie Mac, two government-sponsored enterprises that support the mortgage market, allow lenders to use existing data — run through an automated underwriting system — to originate the mortgage without asking for a real estate appraiser’s feedback.
How to qualify for a PIW mortgage
Appraisal waivers are only offered on conventional mortgages if you’re buying or refinancing a home — there are some government mortgage refinance programs that don’t require appraisals, but we’ll cover those later.
An appraisal waiver helps speed up the loan process and saves you the $300 or $400 it typically costs for a full home appraisal report. The type of appraisal waiver you get depends on whether you’re applying for a loan backed by Fannie Mae or Freddie Mac:
- Fannie Mae offers its PIW option on loans approved through the Desktop Underwriting (DU) automated underwriting system.
- Freddie Mac’s automated collateral evaluation (ACE) appraisal waiver is offered through the Loan Product Advisor automated underwriting system.
The loan-to-value (LTV) ratio is a measure of how much of your home’s value you’re borrowing, and it’s the most important factor when qualifying for an appraisal waiver. As such, for a shot at a PIW, you’ll either need to make a large down payment (at least 20%) on a home purchase or have at least 10% equity in your home on a limited cash-out refinance. Borrowers who want to get extra money above what they currently owe with a cash-out refinance will need even more equity for an appraisal waiver.
The table below provides the eligibility requirements for each type of appraisal waiver:
| PIW and ACE eligibility requirements |
Property types
|
Purchase types
|
| Refinance types
Limited cash-out refinances for:
Cash-out refinances for:
|
THINGS YOU SHOULD KNOW
Fannie Mae also offers a PIW mortgage for properties in high-needs rural locations, identified by the Federal Housing Finance Agency (FHFA). The property must be a principal residence with an LTV ratio up to 97%. Some lower-income borrowers may be eligible for a PIW mortgage up to a 105% combined LTV ratio, provided they meet lending requirements.
Understanding mortgage appraisals
A home appraisal determines how much your home is worth. A licensed real estate appraiser conducts it and provides an unbiased assessment of the home’s value. The appraiser performs an inspection of the home’s interior and exterior condition, design and features to determine its value compared to recent home sales in your area.
You’ll typically get an appraisal during the homebuying process, and lenders review them to make sure the purchase price checks out and to calculate how much of the home’s value you can borrow. You may also need an appraisal for a mortgage refinance so the lender can confirm your value is high enough to replace your current mortgage with a new one.
THINGS YOU SHOULD KNOW
If you decide to obtain an appraisal, your lender must provide a copy to you at least three days before your closing, according to the Consumer Financial Protection Bureau. You can’t be charged for requesting a copy of the original report.
Pros and cons of getting an appraisal waiver
Pros
You’ll save money on the cost of the appraisal
You won’t have to wait for the appraisal to be completed
You won’t have to spruce up the house for an interior evaluation if you’re refinancing
You may be able to close on a purchase or refinance loan much faster
Cons
You won’t have a third-party opinion of your home’s value
You’ll be relying on data pulled from previous appraisers that may not be accurate now
You could end up borrowing money on a house that’s priced too high
You won’t have an up-to-date assessment on your home’s condition
THINGS YOU SHOULD KNOW
Even if you’re eligible for an appraisal waiver, you can still request a full appraisal. You’re not required to accept a PIW or ACE, even if it’s offered to you. If you have any concerns about the value of the home you’re buying, an appraisal report from a licensed real estate appraiser may be worth the extra expense to prevent you from overpaying for a home. Additionally, you should always get a home inspection for an in-depth look at the home’s condition — from the roof to the foundation.
Other mortgage programs that offer an appraisal waiver
Homeowners with loans backed by the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration (FHA) and the U.S. Department of Agriculture (USDA) can take advantage of streamlined refinance programs that don’t usually require an appraisal. An added bonus: Most of these programs also don’t require any proof of income.
- VA IRRRL. Short for “interest rate reduction refinance loan,” the VA IRRRL allows military borrowers with a current VA loan to improve the terms of their loan and roll in the costs.
- FHA streamline. If you’ve paid your current FHA mortgage on time, you may be able to lower your rate with the FHA streamline program. However, make sure you budget for your closing costs — you can’t add them to your loan amount unless you ask your lender to pay them in exchange for a higher mortgage rate.
- USDA streamlined assist. Low- to moderate-income rural homeowners with a USDA loan may qualify for a streamlined assist refinance to snag a lower payment or improve their loan terms.