Appraisals are generally required for conventional loans, but not always. Fannie Mae and Freddie Mac, which set the rules for most conventional mortgages, both run automated programs that can waive the traditional appraisal when their systems are confident enough in the property’s value. Whether you get a waiver, a lighter alternative, or a full appraisal comes down to factors like your loan-to-value ratio, the property type, and the data the automated underwriting system has to work with.
The appraisal requirement exists because Fannie Mae and Freddie Mac need assurance that the home backing the loan is actually worth what the borrower is paying. Their guidelines govern how the property gets valued, and your lender follows those guidelines when deciding what kind of valuation your loan needs.
When the Appraisal Gets Waived
Both government-sponsored enterprises run automated programs that can waive the appraisal for qualifying loans. Fannie Mae calls its program “value acceptance,” offered through its Desktop Underwriter (DU) system. Freddie Mac’s equivalent is the Automated Collateral Evaluation (ACE), delivered through Loan Product Advisor (LPA).1Freddie Mac. Automated Collateral Evaluation (ACE) When the system offers a waiver, no appraiser visits the property and no appraisal report is produced.
These systems rely on automated valuation models that pull from public records, prior sale prices, tax assessments, and broader market trends. When the model has high confidence in the property’s value, the system may extend a waiver offer. The decision isn’t based on a single threshold like loan-to-value ratio alone. The system weighs multiple risk factors at once, and two borrowers with the same LTV could get different results based on credit profile, property location, and data availability.
Fannie Mae’s value acceptance can apply to purchases, limited cash-out refinances, and cash-out refinances on one-unit properties, condominiums, principal residences, and second homes. Investment property refinances are also eligible. The loan must receive an Approve/Eligible recommendation from DU, and the waiver offer cannot be more than four months old on the date of the note. Fannie Mae also offers a rural high-needs value acceptance option for purchase transactions on principal residences where the borrower’s income is at or below 100% of the area median income, with LTV ratios up to 97%.2Fannie Mae. Value Acceptance
One important detail: even when the automated system offers a waiver, your lender can decline it. Some lenders have internal policies requiring an appraisal regardless of what the system says. The waiver is an option the lender may exercise, not a guarantee.
What Disqualifies a Loan From a Waiver
Certain transactions are categorically ineligible for Fannie Mae’s value acceptance, no matter what the automated system calculates:
- Two- to four-unit properties
- Co-ops and manufactured homes
- Construction loans, both construction-to-permanent and proposed construction
- HomeStyle Renovation and HomeStyle Refresh loans
- Any transaction where the purchase price or estimated value is $1,000,000 or more
- Leasehold properties and community land trusts
- Gifts of equity, where a family member sells below market value
- Manually underwritten loans
Freddie Mac’s ACE program has a similar exclusion list, though the specifics vary. If your loan involves any of these characteristics, plan on a traditional appraisal.2Fannie Mae. Value Acceptance
Jumbo loans, which exceed the conforming loan limit set each year by the Federal Housing Finance Agency, fall outside the GSE framework entirely and follow appraisal rules set by the individual lender.3Federal Housing Finance Agency. FHFA Announces Conforming Loan Limit Values for 2026
Desktop and Hybrid Appraisals
Not every loan gets a full waiver or a full appraisal. Fannie Mae also offers two intermediate valuation options that the automated system may recommend.
A desktop appraisal is completed by a licensed appraiser who never sets foot on the property. The appraiser develops an opinion of value using public records, MLS data, and information gathered from other parties like the buyer’s agent or homeowner.4Fannie Mae. Desktop Appraisals Turnaround and cost drop, but the appraiser is still producing a professional valuation, unlike a waiver where no appraisal exists at all.
A hybrid appraisal splits the work. A trained third party, often a real estate agent, insurance inspector, or another appraiser, visits the property and collects interior and exterior data, photographs, and measurements. That data package goes to a licensed appraiser, who uses it along with market research to complete the valuation on a Form 1004 Hybrid report.5Fannie Mae. Hybrid Appraisals The appraiser doesn’t visit in person, but they’re working from eyes-on-the-ground data rather than public records alone.
Your lender and the automated underwriting system determine which option is available. You don’t get to pick a desktop appraisal over a full one just because it’s cheaper.
What a Full Appraisal Involves
When no waiver or alternative is offered, the lender orders a traditional appraisal from a state-licensed or certified appraiser. In most cases, the lender works through an appraisal management company rather than selecting an appraiser directly, a separation designed to prevent conflicts of interest.
The appraiser identifies at least three recently closed sales of comparable properties, then adjusts for differences in size, condition, features, and location.6Fannie Mae. Comparable Sales The appraiser also physically inspects the property, verifying the room count, finished living area, overall condition, and any health or safety concerns. If the home has deferred maintenance or defects that affect habitability or marketability, the lender may require repairs before closing. The completed valuation goes on the Uniform Residential Appraisal Report, known as Form 1004.7Fannie Mae. Appraisal Report Forms and Exhibits
The borrower pays for the appraisal, even though the lender orders it and even if the loan falls through before closing. For a standard single-family home, expect roughly $350 to $600, though costs run higher for complex properties, rural locations, or high-cost markets. The fee is typically collected upfront or rolled into closing costs.
From the day the lender orders the appraisal to the day they receive the final report, the process usually takes one to three weeks. Rural properties, unusual features, or busy markets can stretch that timeline.
Your Right to a Copy of the Appraisal
Federal law requires your lender to give you a copy of every appraisal and written valuation completed on the property. Under Regulation B, the lender must deliver the copy promptly after completion or at least three business days before closing, whichever comes first.8eCFR. 12 CFR 1002.14 – Rules on Providing Appraisals and Other Valuations You can waive that timing and agree to receive it at closing instead, but the waiver must be signed at least three days in advance.
If the transaction falls through, the lender still has to send you the appraisal within 30 days of determining the loan won’t close. The lender cannot charge you separately for the copy itself, though they can charge the original appraisal fee. Within three business days of receiving your application, the lender must notify you of your right to request a copy.
What to Do When the Appraisal Comes in Low
A low appraisal, where the appraiser’s value falls below the purchase price, is one of the more stressful problems in a home purchase. The lender will only base your loan on the appraised value, not the contract price, which means the gap comes out of your pocket unless you find another solution.
You have a few options. The most common is renegotiating the purchase price with the seller to match or come closer to the appraised value. In a buyer-friendly market, sellers often agree rather than lose the deal and start over.
If you believe the appraisal contains errors, you can request a Reconsideration of Value through your lender. This isn’t a do-over. You need to provide specific evidence that the appraiser missed relevant information, such as comparable sales that more closely match the property or upgrades the appraiser failed to note. Each borrower gets one ROV request per appraisal report.9Fannie Mae. Reconsideration of Value (ROV)
The third option is covering the difference in cash at closing. If the appraisal comes in at $380,000 on a $400,000 contract, you’d need an extra $20,000 beyond your down payment and closing costs.
When none of these work, the transaction typically falls apart. Most purchase contracts include an appraisal contingency that lets the buyer walk away and recover the earnest money deposit if the property doesn’t appraise at or above the purchase price. If you waived that contingency to make your offer more competitive, you could lose your deposit or face legal exposure for breaching the contract. Weigh that risk carefully before you waive it.