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.

What is an appraisal waiver?

Home appraisals are usually a required part of getting a mortgage, but appraisal waivers give homebuyers the ability to skip over this step. This can potentially save time and money: home appraisals typically cost $300 to $500 for a full report.

A home appraisal was the standard method to evaluate a home’s fair market value for many years, but if you’re buying a home with a conventional loan, you may have alternatives to a home appraisal:

• Value Acceptance (also known as an appraisal waiver): The lender provides a home value and it is accepted without the need to confirm it with an appraisal.
• Value Acceptance + Property Data (also known as an inspection-based appraisal waiver): This option doesn’t require an appraisal or appraiser, but isn’t as simple as a straight-ahead value acceptance. It still depends on property data collected by a third-party professional who is trained to assess the interior and exterior of a home — however, this person doesn’t have to be a real estate appraiser. This option is sometimes also known as an “inspection-based appraisal waiver.”
• Hybrid appraisal. A hybrid appraisal is a valuation method that involves collaboration between an appraiser and a property-data collector, but may only be allowed in special cases.

How to qualify for a PIW mortgage

Appraisal waivers are only offered on conventional mortgages, and only 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.

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. You’ll see the maximum LTV allowed for each type of appraisal waiver listed in the table below.

For the remainder of 2024, to have a shot at a PIW mortgage, you’ll either need to make a large down payment (at least 20%) on a home purchase or 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.

However, beginning in 2025 the rules will change to expand who can qualify, allowing for an only 3% to 10% down payment, depending on your situation (see the  icon in the table above for more details).

Regardless of whether you’re refinancing or purchasing a new home, to be eligible for a PIW mortgage, the home must be either a:

✓ One-unit property
✓ Condominium

This means that multi-unit properties are not eligible for a PIW mortgage.

Fannie Mae PIW mortgages in high-needs rural locations

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.

The type of appraisal waiver you can 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 Desktop Underwriter (DU), an automated underwriting system.
• Freddie Mac’s automated collateral evaluation (ACE) appraisal waiver is offered through the Loan Product Advisor automated underwriting system.

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 inspects 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.

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You must have your appraisal at least 3 days before closing

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 (CFPB). You can’t be charged for requesting a copy of the original report.

Appraisal waiver pros and cons

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

You can request an appraisal even if you don't need one

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

Several government-backed mortgage programs offer their own appraisal waiver options, too. Homeowners with loans backed by the U.S. Department of Veterans Affairs (VA loans), the Federal Housing Administration (FHA loans) and the U.S. Department of Agriculture (USDA loans) 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.