In a move that could delight some home buyers, secondary mortgage market giants Freddie Mac and Fannie Mae are now allowing automated appraisals on purchase-money mortgages. Here are the details, and what it could mean for Chicago home buyers!
If you’re unfamiliar with “Freddie” or “Fannie”, here’s a crash course. They are government-sponsored entities in the secondary market that buy and hold loans originated by banks and other lenders. This keeps the flow of money moving, so that lenders can keep issuing new loans to the public.
Freddie and Fannie are allowing automated appraisals in order to speed up the mortgage process, and help buyers get to closing sooner. A traditional in-person, on-site appraisal can take weeks to obtain.
However, only about 5% of new mortgage applications will be eligible for an automated appraisal. Borrowers must be an excellent (low) credit risk, and the property must meet certain criteria, which is subject to change. Here’s how it stands so far!
- Properties must be one-unit residences, including single-family homes, condos and townhomes. (2-to-4 unit dwellings, co-ops, manufactured homes and leasehold properties are NOT eligible.)
- Loan-to-Value ratio must be 80% or lower. Put another way, the borrower must have 20% down.
- Property must be the primary residence of the borrower.
- Borrowers must meet other eligibility criteria regarding creditworthiness.
- Electronic data for the property’s sales histories must be accessible and reliable.
Are automated appraisals good for the home buyer? This remains to be seen. While eligible buyers will save time, and save the $500 cost of a traditional appraisal, they won’t be getting an objective, current opinion of value from an experienced appraiser.
Automation only takes you so far. It can’t examine the home condition and account for flaws that could compromise the market value. A home inspector can point out flaws, but that person can’t tell you whether the home price is fair.
StartingPoint Realty – your guide to Chicago home buying!
Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty
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