Occasionally, homeowners consider refinancing a mortgage during their homeownership journey. Whether it’s to secure a lower interest rate, reduce monthly payments, tap into home equity or change the terms of the loan, refinancing can offer a multitude of benefits. Yet, the importance of appraisals in the refinancing process is frequently underestimated. In this blog, we’ll explore the significance of a refinance appraisal, when it’s needed and the common types of home appraisals used.

What Does a Refinance Appraisal Do?

A home appraisal is a thorough assessment of the current value of your home. This market value assessment serves multiple purposes during the refinance process.

1. Loan-to-value ratio: The loan-to-value ratio (LTV) is the ratio of the loan amount to the property’s appraised value. It matters when determining the risk of the mortgage refinance. A lower LTV signifies more equity in the property, which is seen as less risky to the lender. A higher LTV can lead to a higher interest rate or more stringent loan terms.
2. Risk mitigation: Lenders use a mortgage refinance appraisal to minimize their risk. The appraisal for a refinance helps them establish a reasonable expectation of how much they can recoup should they sell the home if the borrower defaults on the loan.
3. Compliance: Many regulatory and lending guidelines require an appraisal report for refinancing, particularly when the loan is to be sold in the secondary mortgage market. Appraisals help lenders comply with these regulations and ensure that the loan meets industry standards.
4. Loan approval and terms: Appraisals can influence the type of loan a homeowner qualifies for. If the appraisal reveals that the home’s value is high, homeowners may be eligible for more favorable loan options, such as a lower interest rate or a jumbo loan. Conversely, if an appraisal comes in low, it may limit the loan options available to the homeowner.
5. Asset verification: Lenders want to make sure that the property they are financing is real, in the condition described by the borrower and has no undisclosed issues that might affect its value. The appraisal process serves as an essential tool for verifying these aspects.
6. Quality control: Appraisals help maintain the quality of the lender’s loan portfolio. If a mortgage lender relies solely on a borrower’s estimation to determine how much the home is worth, it could lead to loans with inflated values, increasing the risk of default.

Are Appraisals Always Needed to Refinance?

An appraisal is not always required for mortgage refinancing, but this depends on several factors, including the type of refinance, the LTV and the lender’s policies. Here are some common scenarios in which an appraisal may or may not be necessary for refinancing:

1. Rate and term refinance: A rate and term refinance in which the borrower is simply changing the interest rate or loan term without taking cash out, an appraisal may not be required, especially if the loan amount is significantly lower than the fair market value.
2. Cash-out refinance: If you’re looking to take cash out of your home’s equity as part of the refinance, an appraisal is typically required to determine the property’s current market value.
3. FHA or VA refinancing: A government-backed loan, such as an FHA or VA loan, often requires appraisals for both rate and term and cash-out refinances. These appraisals report on the home’s market value and its current condition.
4. Conventional loan requirements: Conventional lenders may waive the appraisal requirement for certain borrowers, especially if the borrower has substantial equity and meets specific credit and income criteria. However, this is at the lender’s discretion and can vary between lenders.
5. Loan-to-value ratio: If your LTV is low, meaning you have a significant amount of equity in your property, some lenders may consider waiving the appraisal requirement. However, the specific LTV threshold that triggers an appraisal waiver varies between lenders.
6. Streamlined refinances: Some government-backed loans, like the FHA Streamline Refinance and the VA Interest Rate Reduction Refinance Loan (IRRRL), offer streamlined, no-appraisal refinance options for eligible borrowers. These programs are designed to make refinancing easier and more efficient.

Keep in mind that while some lenders may offer no-appraisal or appraisal-waiver options, others may still require an appraisal based on their internal policies and risk assessments. Additionally, even if an appraisal is initially waived, the lender may request one during the underwriting process if they have concerns about the property’s value or condition.

Types of Refinance Appraisals

When you prepare for a mortgage refinance, different types of appraisals can be used to determine the current market value of the property. Here are some common types of refinance appraisals:

1. Full appraisal: A full appraisal, also known as a traditional appraisal, is a comprehensive assessment of the property’s value. It involves a physical inspection of the property by a licensed appraiser who evaluates various factors, including the property’s condition, size, features on the interior and exterior and location.
2. Drive-by appraisal: In a drive-by appraisal, appraisers look briefly at the exterior of the property from the street, but they do not enter the home. Drive-by appraisals are typically used for certain low-risk refinances. The refinance appraisal cost for this is less expensive and time-consuming than full appraisals.
3. Desktop appraisal: A desktop appraisal does not involve a visit to the property. Instead, the appraiser relies on available data, including public records, comparable sales in the area and photographs, to estimate the appraisal value. Desktop appraisals are often used for streamlined or low-risk refinance transactions.
4. Hybrid appraisal: A hybrid appraisal mixes traditional appraisal methods with technology. It may involve an appraiser inspecting the property’s exterior while relying on data and photos for the interior assessment. Hybrid appraisals are often quicker and more cost-effective than full appraisals.
5. Automated Valuation Model (AVM): AVMs are computer-generated property valuations that use algorithms and data analytics to estimate a property’s value. AVMs don’t involve a human appraiser or a property inspection. They are often used for quick and low-risk refinances, but their accuracy can vary depending on the quality of the data and the specific AVM model used.
6. Property Inspection Waiver (PIW): Some refinances, especially those involving government-sponsored enterprises (GSEs) like Fannie Mae or Freddie Mac, may qualify for a PIW. In this case, the lender relies on their own data or automated tools to determine the property’s value and may waive the need for a traditional appraisal.

The type of appraisal used can vary by lender, loan program or local regulations. The choice of appraisal type often depends on the lender’s risk assessment and the specific circumstances of the refinancing. Borrowers should discuss the appraisal requirements, including costs and implications, with their lender or mortgage professional to determine which type is needed for their refinance.

Choose Jaro Team for Your Mortgage Refinancing Needs

With a deep understanding of the local real estate market and a proven track record, we are well-equipped to secure the best refinancing options for our clients. We tailor solutions to meet individual financial goals and provide clear guidance throughout the refinancing process. By choosing Jaro, you’ll benefit from a dedicated and experienced team of professionals committed to helping you save money and achieve their homeownership objectives. Contact us today to get started.

Purchasing a home is a significant milestone in one’s life, but the hurdle of securing a substantial down payment can deter many aspiring homeowners. Conventional wisdom dictates saving 20 percent of a home’s purchase price for the down payment but this can be tough. However, there are creative ways to fund your down payment that extend beyond a traditional savings account, bank loan or personal loan. In this blog, we will explore some innovative strategies that can help you achieve your homeownership dreams.

Crowdfunding Your Down Payment

Crowdfunding platforms have revolutionized fundraising by enabling individuals to reach out to a broader community for support. By utilizing platforms like GoFundMe or Kickstarter, you can create a compelling campaign detailing your dream of homeownership and the importance of your down payment. Friends, family and even strangers can financially support you. While this method may not cover the entire down payment, it can make a substantial difference in your savings.

Down Payment Assistance Programs

A down payment assistance program is an initiative offered by various government agencies, non-profit organizations or even private companies. They aim to help individuals and families overcome the financial barrier associated with making a down payment on a home purchase.

This financial aid is intended to be used exclusively for the down payment and, in some cases, closing costs associated with buying a home. It comes in various forms such as grants, forgivable loans or low-interest loans. Many are tailored to specific groups of homebuyers, such as first-time buyers, low-income individuals or families, veterans, teachers, healthcare professionals or residents of particular geographic areas who may face greater challenges in saving for a down payment.

Down Payment Assistance from Employers

Some employers offer down payment assistance programs as part of their benefits package. Check with your HR department to see if your company provides any assistance with down payments that you can leverage.

Loan Programs with Zero or Low Down Payment Requirements

Zero or low down payment loan programs are mortgage options that enable homebuyers to purchase a home with minimal or no cash upfront. Here’s a brief overview of these types of loan programs:

• No down payment loans: These loans, such as USDA (U.S. Department of Agriculture) and VA (Veterans Affairs) loans, allow eligible borrowers to purchase a home without making any down payment. VA loans are available to those who currently or previously served our country in the armed forces, military reserves, National Guard or are surviving spouses, while USDA loans are intended for rural and some suburban homebuyers who meet specific income criteria.
• Low down payment loans: Loans from the Federal Housing Administration (FHA loans) and conventional loans with minimum down payment options enable borrowers to buy homes with down payments as low as 3.5 percent (FHA) or 3 percent (conventional, with private mortgage insurance). These loans are more widely accessible and offer flexibility in terms of credit score requirements and borrower qualifications.

It’s essential for prospective homebuyers to carefully consider the advantages and disadvantages of zero or low down payment loan programs. While they provide opportunities for homeownership with less upfront cost, there are trade-offs, such as potential mortgage insurance premiums and in some cases, higher overall loan costs. You’ll also likely have to pay closing costs to complete the transaction. Borrowers should take into account their personal finance situation, evaluate what a reasonable loan amount and monthly mortgage payment look like and envision their long-term goals before determining which loan option is most suitable for their needs.

Use Your Tax Refund and Bonuses

Consider allocating your annual tax refund or work-related bonuses toward your down payment fund. This lump sum can significantly boost your savings without affecting your regular budget.

Side Hustles and Gig Economy Work

Exploring side gigs or gig economy work can help you generate additional income dedicated to your down payment. Ridesharing, freelance writing, online tutoring and many other opportunities can be pursued part-time to bolster your savings.

Borrowing from Retirement Accounts

While this option should be approached with caution, some retirement accounts, such as 401(k)s or IRAs, allow for penalty-free withdrawals for first-time homebuyers. Before moving forward, it’s crucial to grasp the implications and potential risks associated with this approach.

Achieving homeownership is a significant milestone with the down payment often being the biggest hurdle. While traditional savings methods are reliable, exploring creative ways to fund your down payment can expedite your path to homeownership. As you explore these options, it’s important to assess your financial situation carefully, consult with financial professionals and make informed decisions that align with your long-term financial goals.

Contact Jaro Team to Find a Loan Program that Works for You

Choose Jaro Team as your trusted local mortgage lender. We work tirelessly to tailor loan solutions that match your unique financial circumstances and homeownership goals. Our expertise and access to a wide range of loan products enable us to navigate the complexities of the mortgage industry. We ensure you’ll receive the guidance and support needed to make informed decisions and achieve your dream of homeownership. Contact us today to get started.

© 2023 Premier Mortgage Resources, LLC (“PMR”) | NMLS #1169 www.nmlsconsumeraccess.org | 3363 Presidential Dr. #200, Meridian, ID 83642 | Equal Housing Opportunity |All information contained herein is for informational purposes only and, while every effort has been made to ensure accuracy, no guarantee is expressed or implied. Programs shown do not demonstrate all options or pricing structures. Rates, terms, programs, and underwriting policies are subject to change without notice.  This is not an offer to extend credit or a commitment to lend. All loans are subject to underwriting approval. Some products may not be available in all states and restrictions apply.  PMR is not affiliated with or an agency of the federal government.

Tiny homes offer numerous benefits, including affordability, simplicity and sustainability. Their reduced construction and maintenance expenses make them an appealing choice for individuals who hope to attain financial freedom and live a minimalist lifestyle. The compact size of tiny houses promotes energy efficiency and diminishes their environmental footprint. Additionally, they often cultivate a closer connection to nature and the outdoors, fostering a sense of freedom and a simpler, clutter-free lifestyle.

Even though there are undeniable benefits to tiny house living, financing this lifestyle can be challenging. It requires careful financial planning and consideration, as well as exploring various financing options to make the dream of tiny house living a reality.

Challenges to Tiny Home Financing

Financing a tiny home can be challenging due to several factors:

• Lack of traditional mortgage options: Tiny houses are not always eligible for traditional mortgage loans as they often do not meet the minimum size requirements or minimum loan amounts set by lenders. This can limit your financing options.
• Limited collateral value: Tiny houses typically have a lower market value compared to traditional homes, making them less attractive to lenders who rely on collateral for security.
• Zoning and legal issues: Zoning regulations and building codes can differ substantially from place to place. Some areas may not permit tiny houses, making it difficult to secure financing if your tiny house is not legally compliant.
• Difficulty in resale: Tiny houses may have a limited resale market, which can be a concern for lenders if they need to repossess and sell the property in case of default.
• High interest rates: Due to the perceived risk associated with tiny houses, lenders may charge higher interest rates to mitigate potential losses.
• Shorter loan terms: Tiny house financing may come with shorter loan terms, resulting in higher monthly payments compared to traditional mortgages.
• Personal loans: Some individuals finance their tiny homes using personal loans. However, personal loan funds typically come with higher interest rates than mortgage loans, which can make them less affordable.
• Limited financing options: Finding lenders that specialize in tiny house financing can be challenging as they are not as common as traditional mortgage lenders.
• Credit history: Lenders may have stricter credit requirements for tiny house loans, making it more difficult for individuals with less-than-perfect credit to secure financing.
• Down payment requirements: Tiny house loans might entail a higher down payment from borrowers, which can be a barrier for some buyers.
• Insurance: Obtaining insurance for a tiny house can be more complex and expensive than for a traditional home, which can affect your ability to secure financing.

Solutions for Financing a Tiny Home

Despite the challenges associated with financing a tiny home, it’s important to emphasize that it is indeed possible. Some common financing options available for tiny homes include:

• Home equity loans or lines of credit: If you own a property with equity, you may be able to use a home equity loan or line of credit to finance your tiny home. You will likely be offered lower interest rates and longer repayment terms if you go this route.
• Tiny home lenders: Some lenders specialize in financing tiny homes and may offer unique tiny house loan products. These lenders can provide financing options that align more closely with the needs of tiny home buyers.
• Traditional mortgages or home loans: Some tiny home owners choose to place their tiny homes on a foundation, which may make them eligible for a tiny home mortgage or home loan. However, this option may require complying with local zoning and building codes.
• Builder financing or seller financing: Occasionally, buyers may be offered financing options directly from the tiny home builder or seller. Securing financing from tiny home builders can be convenient but loan terms may vary widely.
• Personal loan: One of the many tiny house financing options include personal loans. Unlike mortgages, they are unsecured and typically have shorter repayment terms. The interest rate can vary based on your credit score and the lender you select
• RV loan: If your tiny home is on wheels and meets RVIA (Recreation Vehicle Industry Association) standards, you may be able to secure an RV loan. With RV loans, you typically pay less interest and have a longer period to pay off the loan.
• Chattel loan: Chattel loans are similar to RV loans and are specifically designed for movable tiny homes, including those on trailers. These loans are secured by the movable property (the tiny home itself) and may have slightly higher interest rates than traditional mortgages.
• Crowdfunding and grants: Some people turn to crowdfunding platforms to raise money for their tiny homes. Additionally, there are grants and nonprofit organizations that support affordable housing initiatives.
• Credit cards: While not recommended due to high interest rates, some individuals use credit cards to finance their tiny homes. This should only be a solution if you’ve devised a plan to pay off the debt quickly.

Be diligent and carefully review the financing options that meet your needs and financial situation before making any decision. Be sure to consider factors such as interest rates, repayment terms, eligibility requirements and any associated fees when evaluating your choices.

Contact The Jaro Team for Tiny Home Financing Options

The Jaro Team understands that financing your dream tiny home can be a complex and daunting task. However, we know there’s a solution for you. We’re dedicated to helping you secure the funds you need to finance your tiny home journey. Contact us today to get started.

© 2023 Premier Mortgage Resources, LLC (“PMR”) | NMLS #1169 www.nmlsconsumeraccess.org | 3363 Presidential Dr. #200, Meridian, ID 83642 | Equal Housing Opportunity |All information contained herein is for informational purposes only and, while every effort has been made to ensure accuracy, no guarantee is expressed or implied. Programs shown do not demonstrate all options or pricing structures. Rates, terms, programs, and underwriting policies are subject to change without notice.  This is not an offer to extend credit or a commitment to lend. All loans are subject to underwriting approval. Some products may not be available in all states and restrictions apply.  PMR is not affiliated with or an agency of the federal government.

Looking for a place to call home? Look no further than Twin Falls, Idaho!

Located in the heart of the Gem State, Twin Falls offers a good balance of small-town charm and big-city amenities.

Nestled in the Snake River Canyon, the area is home to stunning waterfalls, towering cliffs, and peaceful parks. Visitors and residents alike can explore miles of hiking trails, fish in the Snake River, or just relax and take in the breathtaking views.

Here are some things you should consider when looking for Idaho homes in Twin Falls.

Begin with a pre-approval

If you’re in the market for a new home, there’s one important step you should take before you even begin looking at properties: getting pre-approved for a mortgage. It’s important to be financially prepared before you start your house hunting journey to ensure your home is within your financial reach. This is something Jaro Team can help you with!

But why should you bother with a pre-approval? Here are three reasons why it’s a good first step in your home buying journey:

1. You’ll know how much house you can afford. By getting pre-approved, you’ll have a clear understanding of your budget and what you can realistically afford. Plus, knowing your budget will help you narrow down the areas you can consider living in.
2. You’ll be more competitive in a competitive market. Homes can sell in a matter of days, and multiple offers can be on the table. Having a pre-approval letter in hand may give buyers an advantage in terms of negotiation and can make for a more streamlined buying process. Additionally, sellers may be more likely to consider your offer if you have a pre-approval because they know the financing is likely to go through.
3. A pre-approval gives you a clear picture of how much you can afford, which can help you avoid falling in love with a home that is out of your price range.

The neighborhoods

Once you have a pre-approval, it is time to find a good real estate agent and begin the home search. Part of this is the selection of a neighborhood that you like. It directly affects your quality of life, social interactions and overall experience. It’s therefore imperative to conduct thorough research about the available amenities, features and overall vibe of the neighborhood that suits your personality and lifestyle.

The condition of the home

When searching for a new home, one of the most critical factors to evaluate is the home’s physical condition. The state of a home will influence not only your future maintenance expenses, but also your initial purchase decision, making appropriate due diligence critical.

Here’s what you need to know to spot any signs of wear or damage.

First, examine the home’s exterior for any cracks or visible wear, which could indicate a lack of regular maintenance. Look out for signs of water damage or leaks, like rotted or warped wood, mold growth, or water stains, as these could lead to costly repairs.

Inside the home, be on the lookout for visible signs of neglect or disrepair, such as worn-out carpets or floorboards, dated appliances or inadequate plumbing fixtures. Inspect the walls and ceilings for leaks or cracks and check for signs of mold or mildew in bathrooms or basements, which could indicate a more significant problem.

Inquiring about recent upgrades or repairs can also provide some insight into the home’s condition. For example, has the owner updated the windows or HVAC systems, or repaired the roof? Information like this can give you an idea of the home’s upkeep and whether any major issues require attention.

Work with a strong loan officer and real estate agent team

When looking to buy a home, the process can be long, time-consuming and oftentimes overwhelming. To make this process smoother find and work with a team of experts who know the real estate market inside and out. By combining the expertise of both a trusted loan officer and real estate agent, you can streamline the process, helping to make the experience more efficient and enjoyable.

If you would like help with this, contact us today!