Do You Need an Appraisal to Refinance?

Janet Berry-Johnson, Author at LendingTree

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You’ll typically need a home appraisal to refinance your mortgage, both to confirm your home’s value and to set your new loan amount. If your refinance appraisal comes back lower than expected, though, you may not be able to refinance unless you use a streamline refinance program that doesn’t require an appraisal.

Here’s everything you need to know about getting your home appraised for a refinance loan.

Key takeaways

Many refinance loans require a home appraisal to verify market value, although some government-backed and streamline programs allow you to skip it.
A low appraisal can impact your loan-to-value ratio, potentially leading to higher interest rates or even loan denial.
Appraisers evaluate your home’s physical condition, interior features and exterior characteristics, along with market factors like location and comparable sales.

What is a home appraisal for a refinance?

A home appraisal provides your lender with a professional estimate of how much your home is worth. Depending on how much you want to borrow with your refinance loan, the appraisal can determine several things:

Whether you can complete the process to refinance your home.
If the appraisal shows your home is worth less than the amount you want to borrow, your loan may not be approved.
Whether you have to pay for private mortgage insurance (PMI).
If your loan amount will be 80% or less of the home’s appraised value, you’re typically not required to have PMI.
How much money you could get in a cash-out refinance.
Many cash-out refinance lenders require borrowers to retain 15% to 20% equity after the refinance.

Read more about refinance requirements.

When is an appraisal not required for a refinance?

If you already have a government-backed mortgage, you may be able to refinance without an appraisal using one of these programs:

FHA streamline refinance loan program
VA interest rate reduction refinance loan (IRRRL) program
USDA streamlined assist refinance loan program

Wondering which type of refinance you need?

There are a handful of common mortgage refinance options to consider, including:

Rate-and-term refinances for changing interest rates or loan terms
Cash-out refinances for borrowing against home equity
Streamlined options for FHA, VA and USDA loans that require less documentation

Choosing the right refinance depends on what goals you want to achieve with the refinance, as well as your existing loan terms, financial profile and break-even point.

Read our guide to mortgage refinance options to determine what loan type is best for you.

Alternatives to a home appraisal for your refinance

If you’re refinancing a home with a conventional loan, you can’t skip the valuation process altogether, but you might be able to qualify for these alternatives to a traditional appraisal:

Value acceptance. Formerly known as an “appraisal waiver,” this is when the lender uses a database of existing information about the home to provide an estimated value. The lender accepts that value without the need to confirm it with an appraisal.
Value acceptance plus property data. This option eliminates the need for an appraisal and appraiser, relying instead on property data collected in person by a third-party professional trained to assess the interior and exterior of a home.
Hybrid appraisal. A hybrid appraisal involves collaboration between a property data collector and an appraiser. The appraiser doesn’t visit the home in person, so this method is only allowed in special cases.

How do home appraisals for a refinance work?

In cases where you do need an appraisal, refinance lenders will typically order one after they’ve reviewed all your application paperwork as part of the closing process. The appraisal results must be available at least three days before your closing date.

The appraisal appointment itself — when the appraiser is in your home — takes anywhere from a few minutes to a couple of hours. The full appraisal process can take a few days to a couple of weeks. It depends on the size and complexity of your home and the appraiser’s schedule.

What happens if the appraisal comes in low or high?

Your home’s value, as established by an appraisal, will affect the loan-to-value (LTV) ratio of your refinance loan. Here’s what that means for you:

If the appraisal comes in higher than the purchase price, you’re good to go — your home’s value is increasing, and that’s always a good thing. If it’s a cash-out refinance, you may be able to get better refinance interest rates or take out more cash than you had initially planned.
If the appraisal comes in lower than the purchase price, you’re on shakier ground. Your lender could charge you higher interest rates, or it may not even approve your refinance. Lenders won’t approve a refinance loan that’s for more than the home is worth.

What to do if the appraisal comes back low for a refinance

A low appraisal doesn’t have to be the end of your refinance plans. Here are some options to consider:

Review the appraisal report for errors. Check for incorrect details about your home’s size, number of bedrooms and bathrooms, conditions or recent upgrades, as these can impact the appraised value.
Provide additional comparable sales. Share recent sales of similar homes in your area that the appraiser may not have included.
Explore a different refinance program. Some streamline refinance programs don’t require an appraisal.
Consider a smaller loan amount. Reducing your LTV ratio could help you move forward despite the lower valuation.

Who pays for the appraisal, and how much will it cost?

Who pays: The borrower covers the cost of the appraisal, typically paying for it either as part of the loan closing costs or financing it into the loan amount.

How much it costs: For a single-family home, appraisals usually cost between $300 and $500.

The appraisal could be more expensive if your home is unusually large or complex, or if there’s a shortage of appraisers in your area. You can also expect to pay a bit more if you need a VA home appraisal; you can check VA appraisal rates by county at the VA website.

You’re entitled to receive a copy of the appraisal from the lender at no extra cost, according to the Consumer Financial Protection Bureau.

What does an appraiser look for?

While you can’t control every factor that affects your appraisal, like market trends or location, you can prepare your home to make the best possible impression. Here’s an overview of what appraisers typically look at while they’re on site.

Physical condition

Structural integrity of the foundation, walls and roof
Evidence of water damage, pest damage or other deterioration
Overall maintenance and upkeep, including cleanliness and accessibility of all areas, including basements, attics and crawl spaces
Functionality of major systems, including HVAC, plumbing and electrical

Interior characteristics

Condition of walls, ceilings and flooring (no major cracks, stains, or damage)
Quality and condition of fixtures, appliances and cabinetry
Working order of basic features like faucets, light switches and smoke detectors
Number of bedrooms and bathrooms, along with their size and layout
Updates or renovations, especially in kitchens and bathrooms

Exterior characteristics

Curb appeal, including landscaping, paint and general upkeep
Roof condition and age
Quality of windows, doors and exterior finishes
Size of the lot and usable outdoor space
Presence of additional structures, such as garages, sheds or decks, and their condition

Addressing issues in these areas before the appraisal can improve your chances of a smooth refinance.

How can I get a high appraisal for my refinance?

A well-cared-for and prepared home can help maximize its appraised value, which may improve your refinancing options. Below, we’ll walk through some common issues that can hurt your appraised value and offer practical steps you can take to address them before the appraiser arrives.

Curb appeal: Does the property look nice from the outside?

What hurts: A messy, overgrown or unkempt look can bring down your home value.
How to prepare: A fresh coat of paint on accents, a landscaped yard, clean windows and a neat porch can make a difference.

Interior walls: Are they structurally sound and in good repair?

What hurts: Damaged drywall, chipping paint or wood rot.
How to prepare: Fix any holes or dents in drywall made by active kids or previous hanging wall art, and repair any wood damaged by moisture. Consider repainting with light, neutral paint colors.

Working features: Faucets, light switches, smoke detectors and door handles may seem like small features, but they can make a difference in your appraised value.

What hurts: It’s not a good look if many of the basic elements of your home — from toilets to fans and appliances — don’t work.
How to prepare: Ensure that all the kitchen appliances run, the HVAC works, all the sinks drain and there are no dripping faucets, cracked windows or missing hardware.

Does a messy house affect a refinance appraisal?

Clutter on the inside of your home shouldn’t affect the appraised value, but to see and test everything, an appraiser needs to be able to walk around in every part of the home. Some clutter is normal, but everything needs to be accessible, including basements, attics, sheds and crawl spaces.

On the flip side, there are some key factors in an appraisal that you can’t control:

Comparable sales. Also known as “comps,” these are nearby homes with similar features and amenities that have sold recently. They give the appraiser an idea of how much value your home holds in the current market.
Location. Location is an extremely important factor in real estate value, but the desirability of any given location can change over time.
Market fluctuations. The real estate market is sensitive to many factors, including interest rates, the changing cost of construction, income trends, population growth and more.

What happens after an appraisal in the refinance process?

The lender will review the appraisal results and use them to finalize the LTV ratio on your home refinance. Unless the appraiser finds something serious and unexpected that lowers your estimated home value, everything should go smoothly as you head toward the end of the closing process.

What if you don’t agree with the home appraisal results?

While the appraisal process should be unbiased, there have been instances of discrimination. Agencies like the Federal Housing Finance Agency (FHFA) are working to address and prevent such illegal practices.

You can dispute an appraisal that comes in lower than expected. Review the appraisal documents and look for:

Errors. Incorrect numbers, such as square footage, missing appliances and features.
Better local comparables. Include another home in your area that sold within the last 90 days that might be a better comparable transaction.
The appraiser’s experience and local market knowledge. If the appraiser isn’t a seasoned professional or from the local area, they may not have the best skill set.

Gather any documents that support your case, including legal descriptions of the property and proof of improvements made to the home, and submit them to your lender with a dispute letter, also known as a reconsideration of value (ROV). Your real estate agent can help you with this.

Frequently asked questions

Once the appraiser completes the appraisal, it typically takes about six weeks to close on your refinance. During this time, the lender reviews the appraisal report, finalizes underwriting and prepares your loan documents. Missing documentation or issues revealed by the appraisal can cause delays.

Yes. A refinance appraisal focuses on determining your home’s market value, which helps the lender decide how much to loan you. A home inspection is a more detailed evaluation of the property’s condition to identify potential repairs or safety issues. Inspections are common in home purchases, but they’re generally not required for refinances.

Yes. The lender can deny your refinance if the appraisal is too low, if your credit or debt-to-income (DTI) ratio changes or if new information comes out during underwriting. In some cases, you can overcome a low appraisal by adjusting the loan amount, providing additional funds at closing or exploring alternative refinancing programs.

Not directly. Property taxes are based on your local tax assessor’s valuation, which is separate from the lender’s appraisal. However, if the appraisal prompts you to make improvements that increase your home’s market value, your assessed value (and potentially your property taxes) could go up in the future.

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