You can refinance your home without an appraisal by getting a FHA Streamline Loan. These loans are insured by the Federal Housing Authority (FHA) and can only be provided by FHA-approved lenders. You must first check to see if you satisfy the requirements for such a loan and locate a qualified lender. Finally, you need to pay closing costs upfront as they cannot be rolled into the new loan for this particular type of refinancing.
Check to see if you meet the requirements. If you wish to refinance without an appraisal, you need to get a FHA Streamline Loan, which is a loan guaranteed by the Federal Housing Authority (FHA). To qualify for one, you must have made all of your mortgage payments on time during the last year, have owned the property you wish to refinance for at least six months, and be pursuing a loan that does not exceed your current loan. If you meet these requirements, you can apply for an FHA Streamline Loan.
Find an FHA-approved lender. Most of the large institutions are FHA-approved. You can check whether your bank or credit union is an FHA-approved lender by searching the database on the US Department of Housing and Urban Development website. It is important that you verify the status of your lender and not simply assume that your favorite bank is FHA-approved merely because it advertises "no-money refinancing" campaigns. Some lenders will offer to refinance your property without any money down, but they simply roll the refinancing cost and the cost of the appraisal into the new loan.
Pay the closing costs upfront. The FHA requires that all closing costs be paid upfront in Streamlined FHA Loans. Your lender will guide you through this process and may choose to establish an escrow account for this purpose (or collect the cost upfront, but promise to return it, in case the new loan is not approved). While it is possible to include the closing cost in the new FHA loan, doing so will automatically result in a larger loan amount than you previously had and you can no longer qualify for a Streamlined Loan in that case. Such FHA loans, where you also add on the closing costs to the outstanding amount, require an appraisal.
Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.