Refinance Mortgage Without Appraisal

by David Sandberg

The most recent CoreLogic report on negative equity showed that, as of the end of 2011, 22.8% of all homes with a mortgage were worth less than the mortgage balance. Historically, people in this situation would have been unable to refinance their mortgages. Today, though, mortgage rates are not only at all-time lows but refinancing programs that do not require appraisals are also readily available. The vast majority of people who could benefit from refinancing their mortgage can find an appraisal-free loan through the FHA, VA, USDA and HARP programs. The odds are that one of these loans will work for you.

VA IRRRL Mortgage Program

Veterans and people serving in the military on active duty are eligible for special home mortgage loans from the Veterans Administration. These mortgages offer veterans the ability to borrow 100 percent of the purchase price at attractive interest rates without having to pay for private mortgage insurance.

The VA also makes a streamlined refinance available through their Interest Rate Reduction Refinancing Loan (IRRRL) program. This special refinance program for VA loans does not require an appraisal or credit underwriting and does not require that you currently reside in the property. This program not only lets you include closing costs in your refinance but also lets you take out up to $6,000 in additional money to spend on energy efficiency improvements. If you are considering this type of loan, shop around for a lender that follows VA guidelines and does not require an appraisal. Many do, even though they are technically unnecessary.

FHA Streamline Refinancing

FHA streamline loans are, technically, also referred to as IRRRL loans. Instead of the VA IRRRL program, though, FHA streamlines are designed for people who have FHA mortgages.

An FHA streamline loan lets you refinance your mortgage and add-in your closing costs. You can choose a 30- or 15-year fixed mortgage or a 5-year adjustable rate mortgage. Credit standards are relaxed from regular lending and they do not require that you get an appraisal. The key requirements are that you are current on your existing mortgage and that the refinancing reduce your monthly payment.

USDA Streamline Refinancing

Primarily used in rural areas, financing from the United States Department of Agriculture offers low down payments and attractive terms, somewhat similar to an FHA loan. The USDA streamline refinance program is especially generous in that it not only does not require an appraisal, but it also does not require income or credit documentation. Their key concern is that the streamline mortgage save you money and that you have been current on your existing USDA mortgage for the last 12 months. This program will not allow you to increase your balance, but you can always have the lender pay your closing costs in exchange for charging you a slightly higher rate. In the 14 predominantly southern states where this program is available, it is an excellent way to refinance.

HARP Loans

If you are like the majority of people with a mortgage, you have a loan that was sold to either Fannie Mae or Freddie Mac. Thanks to the Home Affordable Refinance Program (HARP), you can refinance your loan at attractive terms. HARP loans have no set credit score requirement and no minimum income requirement. Not only do they not have a maximum loan amount relative to your home’s value, but they also do not require your property to be appraised. You just need to have been current on your Fannie/Freddie mortgage for the last six months with no more than one late payment over the last year, and the refinance needs to make you better off in terms of a lower payment or a “more stable” loan. You can even use a HARP loan to refinance your second home or investment property. The one drawback to a HARP loan is that, as with VA loans, although the program’s rules are very lax, many lenders add additional requirements. As such, shopping around will help you find the best program.

A few years ago, refinancing an underwater mortgage was essentially impossible. Thanks to the creation of these four programs, taking advantage of today’s lower rates is within reach for just about every one. Since some of these programs will end in the future, now is the time to act if you are considering refinancing your home.

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