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If you’re looking to save money and time on the purchase of a home, you might have heard that an appraisal waiver can do that for you.

An appraisal waiver substitutes an automated valuation for an in-person assessment of a property you’re buying. It saves time and money, thereby simplifying the buying process. However, only certain transactions qualify for it, and an automated appraisal may miss some of the home’s important details.

Learn more here. This guide will answer such questions as:

•   Why do you need a home appraisal?

•   What is an appraisal waiver?

•   How do you get an appraisal waiver?

•   What are the pros and cons of appraisal waivers?

Why Do You Need a Home Appraisal?

If you’re financing a home with a mortgage, getting a home appraisal is usually a requirement for the lender. An appraisal is an independent evaluation of the home’s value that protects the borrower’s investment in the property. Consequently, it also helps minimize the lender’s risk when releasing money to the borrower for the property.

A home’s value is critical to a lender since the money they make available as a mortgage uses the home as collateral. If they lend out more money than the home is worth and the home goes into foreclosure, they will be unable to recoup their losses when reselling the home. An appraisal assures the bank that the home is worth at least as much as they think it is when lending money.

An appraisal is also important to borrowers because it assures them the property is worth what they’re contracted to buy it for. If there’s something that hurts the home appraisal and the property is not worth as much as they offered in a real estate contract, the buyer has the option of backing out of the sale. They might also renegotiate the terms of the contract (assuming there’s a financing contingency in place). Or, the buyer could come up with more cash to bridge the appraisal gap if they still want the property.

Recommended: Estimate the Value of Your Property

What Is an Appraisal Waiver?

An appraisal waiver is not a situation when an appraisal is not required. Rather, it is an automated property valuation tool versus using the services of a professional appraiser to determine the market value of your home. It can be convenient to get one if your transaction qualifies, saving time and money (more on that below).

However, many transactions won’t qualify, so it’s important to be prepared to go the route of having a professional appraiser involved.

It’s important to note that an appraisal waiver is not the same as the following:

•   A property inspection waiver. This is something a prospective homebuyer may offer to sweeten a deal. It means they will forgo a home inspection, which could reveal structural or maintenance issues, when proceeding with the purchase of a home.

•   An appraisal contingency. This is part of a real-estate transaction that says if a home doesn’t appraise for the purchase price, you can exit the deal and get your deposit back.

Getting an Appraisal Waiver

If you are interested in getting an appraisal waiver, here are some important points to know.

•   You need to go through your lender to be considered for an appraisal waiver. Lenders must submit paperwork through the home mortgage loan program you’re applying for and help determine when an appraisal is not required.

•   Typically, you can qualify for an appraisal waiver if your lender uses the automated underwriting systems known as Desktop Originator (run by Fannie Mae) or Loan Prospector (run by Freddie Mac). Many lenders do use these systems, but that doesn’t guarantee that you will get approved for a waiver.

•   There are likely additional qualifications to get a waiver. For instance, conventional mortgages through Fannie Mae have different rules than FHA when it comes to appraisal waivers. Check with your lender for details about eligibility for an appraisal waiver. You may need, among other factors:

◦   A solid credit score

◦   To be purchasing or refinancing a single-unit property, whether that is a single-family house or a condo.

◦   You may need to pony up a down payment of at least 20%, though there are exceptions, such as people who are applying for homes in what are considered to be high-need rural areas.

Next, take a closer look at the pros and cons of an appraisal waiver.

Benefits of an Appraisal Waiver

Some of the benefits of an appraisal waiver include:

•   A shorter time to closing since you don’t need to schedule an in-person appraisal and wait for paperwork to be completed and filed.

•   Saving the cost of an appraiser’s fee.

Drawbacks of an Appraisal Waiver

There are some downsides of appraisal waivers, too. For example:

•   Automated systems can miss improvements and special features of a home, such as a recent renovation that substantially increases the value of the home.

•   Conversely, they can also miss things that substantially decrease the value of the home, such as a recent flood or signs of water damage in an attic. Hiring a professional appraiser can help mitigate valuation issues like these.

Recommended: Understanding the Different Types of Mortgage Loans

Who Is Eligible for an Appraisal Waiver?

If your transaction meets the following qualifications, it may be considered for an appraisal waiver:

•   If your loan casefile has been recommended for approval

•   The property involved is a single-family residence

•   New construction where there is a prior “as is” appraisal

•   Limited cash-out refinance transactions up to 90% loan-to-value (LTV) ratio for principal residence and second homes; investment properties up to 75% LTV

•   Cash-out refinance transactions up to 70% LTV for principal residences and 60% for second homes

•   Principal residence and second home purchases up to 80% LTV

•   Principal residences in high-needs rural areas identified by FHFA up to 97% LTV

Transactions Not Eligible for an Appraisal Waiver

As per Fannie Mae policy, transactions not eligible for an appraisal waiver include:

•   Construction loans

•   Two- to four-unit properties

•   Cooperative units vs. a condo

•   Manufactured homes

•   Properties valued at $1,000,000 or more

•   Transactions where a gift of equity is used

•   Leasehold properties

•   Texas 50(a)6 loans

•   Community land trust home

•   Homes with a restricted resale price

•   Renovation loans

•   When rental income is used to qualify for the loan

•   When an appraisal waiver is not recommended by underwriting

•   When the lender believes an appraisal is needed

Fannie Mae states that most transactions are not eligible for an appraisal waiver offer, so if you’re not able to get one, it’s not unusual.

Can a Homeowner Do Their Own Appraisal?

A homeowner cannot order their own appraisal when financing through a lender. The lender must order the appraisal, and it must be impartial, independent, and unbiased.

A homeowner can employ a professional appraiser for their own informational purposes, but the appraisal cannot be used in the lending process.

The Takeaway

Getting an appraisal waiver can help streamline the home loan process and save you money, but if your transaction isn’t eligible, don’t fret. The most important thing is likely getting a reliable, on-target appraisal so that you and your lender feel reassured that the property has at least the value of its purchase price. If you don’t qualify for an appraisal waiver, your lender can usually help you through the home-buying process and every challenge that comes your way.

If you’re getting ready to shop for a home loan, consider giving SoFi Mortgages a look. SoFi offers competitive rates, low down payments, and flexible terms for today’s borrowers. Qualifying first-time homebuyers may be able to put as little as 3% down.

Explore the advantages of an online mortgage lender like SoFi today.

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Photo credit: iStock/Prostock-Studio

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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An escrow analysis is a review of funds collected and disbursed in your escrow account throughout the year. Your escrow account is typically used to collect and then pay property taxes and/or insurance payments. The analysis is a simple addition and subtraction calculation conducted by the mortgage servicer to determine if your monthly escrow payments made in the previous year were sufficient to cover expenses.

Deposits from your monthly payment are additions to your escrow account. Subtractions from your escrow account are for charges like your tax bill or homeowners insurance premium.

After the escrow analysis is conducted, the servicer will provide the borrower with an annual escrow account statement reviewing the deposits and disbursements made over the length of the escrow year. It is normal for taxes and insurance to change and your monthly mortgage payment will be adjusted each year. The escrow analysis conducted each year ensures you’re contributing the right amount.

Here’s more information on escrow analysis, including:

•   Why you need escrow analysis

•   How escrow analysis works

•   How to read your escrow account statement that comes after an escrow analysis

Why Do I Need an Escrow Analysis

An escrow account analysis is required under consumer protection laws for the length of escrow. Regulation X of the Real Estate Settlement Procedures Act (RESPA) has mortgage servicers conduct an escrow analysis at the end of each computational year and provide consumers with an escrow account statement. The analysis shows the money coming in from your monthly mortgage payment as well as money going out to pay bills for your taxes and insurance.

The escrow account analysis is necessary to:

•   Find shortages or excess funds

•   Aim to maintain a balance high enough to pay escrow bills

•   Compute a new monthly payment each year from adjusted amounts to escrow bills

If the amount of money exceeded the disbursements, you may see a refund and a lower monthly mortgage payment over the next year. If the amount of money was less than the disbursements, you may have a negative escrow balance and need to make up the difference either in a lump sum or increased monthly payments over the next year.

This analysis also helps keep any excessive escrow monies in your pocket rather than retained with a mortgage servicer.

Recommended: How to Avoid Private Mortgage Insurance

How the Analysis Works

When you apply for a mortgage, your lender will conduct an initial escrow analysis before your mortgage servicer sets up your escrow account. This analysis will total up the costs of all the taxes and insurance premiums you will need to pay throughout the year. Then, that amount is divided by 12 to get the monthly amount that you pay into the escrow account each month.

Here’s a quick example with escrowed items:

Escrow account items	Amount
Homeowner’s insurance premium	$1,200
Property taxes	$1,800
Private mortgage insurance	$1,200
TOTAL	$4,200

After adding up all the yearly expenses paid through your escrow account, divide it by 12 to get your monthly escrow payment.

$4,200/12 = $350 monthly escrow payment

The amount of your escrow payment will be included with your monthly mortgage payment. Your mortgage servicer will handle the amount that needs to go to your escrow account. When the bill for your taxes or insurance comes, the mortgage lender or servicer will pay it from the escrow account for you.

Recommended: What Is an Escrow Holdback?

Every year, mortgage servicers are required to conduct an escrow analysis on your account and send you an annual escrow account statement. This statement includes how much you contributed to the escrow account each month and how much was distributed to taxing entities and insurance companies.

If, throughout the year, your tax and insurance bills totaled more than your monthly escrow deposits, you will see a negative escrow balance. If your monthly escrow deposits were significantly more than your escrowed bills, you may see a refund.

How to Read Your Escrow Analysis Statement

The primary objective of the escrow account disclosure statement is to document where your escrow account stands. It will detail specific contributions and distributions by month and let you know how your monthly escrow payment will change. It is similar to reading a mortgage statement, but there are several elements that are different.

New monthly payment

The annual escrow account disclosure will show you how your payment is going to change. You’ll see:

•   Current payment: This is how much your total monthly payment currently is. It includes both your mortgage principal and interest payment, as well your escrow payment.

•   New payment: Your statement will show your new escrow amount, which, when added to the principal and interest amount, will change your total monthly payment.

•   Shortage/surplus: If your account had a negative escrow balance in the past year due to an increased tax or insurance bill, you’ll see the amount you owe added to your monthly payment. If you have a surplus, you’ll see that here, too.

•   Difference: The statement will include a calculation of the difference between what you were paying in the past year and what you will need to pay in the upcoming year.

•   New payment effective date: You will need to change the amount you pay to your mortgage servicer by the date listed on the disclosure statement.

Escrowed items

Your escrow account disclosure statement will help explain why there was an increase or decrease in your escrow account. These include changes to insurance premiums and property taxes included in your mortgage payment. You may see a comparison summary of your escrowed items, including:

•   County tax

•   Homeowners insurance

•   Private mortgage insurance, or PMI

Your mortgage servicer will compare how much they expected to pay versus how much was actually paid for the escrowed item.

Repayment of Escrow Shortage or Surplus

If there’s a shortage in your escrow account, your mortgage servicer may provide you with the option to make up the shortage in a single payment. You may see an “escrow shortage coupon” at the bottom of the form that you can mail in with your payment.

It should include your:

•   Loan number

•   Name

•   Shortage amount

Because your mortgage servicer is allowed to collect the deficient amount throughout the year, you may not see a due date for a single payment. Keep in mind, however, that this is not the same for a new adjusted payment amount, which must be changed by the payment due date.

If there is a surplus, which is defined as $50 or more, you’ll likely receive a check in the mail.

Escrow Account Projections and Activity History

It’s common to see a table of payments and disbursements by month on an escrow analysis. You’ll see how much you paid each month and when escrowed items were paid. You’ll also see a running account balance, which is important in ensuring there’s enough money to pay for escrowed items throughout the year.

The Takeaway

Escrow analysis occurs at the end of each computational year to ensure there’s enough in your escrow account to cover the costs of insurance and taxes. Excess amounts can be refunded to you, while deficient amounts (or shortfalls) can be added to your monthly payment in the next year.

When thinking about mortgages, whether a new loan or a refinance, SoFi may be able to help you with your homeownership goals. With flexible mortgage loan options, competitive interest rates, and personalized attention from loan professionals, you’ll have the information you need to make important financial decisions, quickly and conveniently.

See the difference a SoFi Home Mortgage Loan can make today.

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Photo credit: iStock/Morsa Images

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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A hotel credit card is a type of credit card that’s co-branded with a major hotel group. They work just like any other credit card, and you can use them to make purchases anywhere that a particular credit card network is accepted. The main difference is that when you use the card for purchases, you earn points, which allow you to save money on hotels. You can redeem those points for free hotel stays and additional perks with that hotel group.

Deciding which hotel credit card is right for you entails more than just finding a hotel you like. To know if a hotel credit card is worth it, you’ll want to know what to look for in a hotel credit card and the pros and cons involved, as well as how redemption rates can vary.

What Are Hotel Credit Cards?

As mentioned, a hotel credit card is a type of card that’s offered through a partnership between a credit card issuer, such as a bank or credit card network, and a major hotel. Hotel credit cards are considered open-loop cards, which means you can use the card to make purchases anywhere that type of card is accepted. This is in contrast to a private label credit card, which you can only use at a particular store.

Hotel credit cards feature a rewards program, which allows you to earn points for purchases made with the card. You can use the points you earn toward stays at hotels, allowing you to save money on hotels. These cards may also come with automatic elite status, which might include free wifi, extended checkout, and complimentary breakfast.

Keep in mind that hotel credit cards are different from a hotel loyalty program, which incentivizes guests to stay at hotels. In return for their stays, guests can earn rewards like free nights and complimentary meals. Hotel credit cards allow you to earn rewards more quickly by making purchases on your card.

How Do Hotel Credit Cards Work?

Hotel credit cards operate how credit cards work usually. You’re given a credit limit and can use your card to make purchases to that limit. You can pay your balance in full each month, or you can opt to pay it back over time, though this will lead to interest charges accruing.

The main draw of hotel credit cards is that there’s a rewards program and various extra perks offered. You rack up credit card points for using your card, and then can redeem them for free hotel rooms. Think of it like the hotel version of an airline credit card, which allows you to earn credit card miles for flights.

Each hotel credit card has a different rewards program and awards points at different rates. The amount you earn hinges on the hotel’s rewards policy as well as your card’s tier. That’s because the same card can have different tiers, with higher tiers enabling you to earn rewards faster.

What to Look for in a Hotel Credit Card

With so many hotel credit cards to choose from, here’s what you’ll want to pay close attention to when researching and comparing your options:

•   Hotel brand: As hotel credit cards only allow you to redeem credit card points for that particular hotel or group of hotels, which major hotel group the card is co-branded with is important. Where are their hotels located, and how many hotels are there? Can you redeem points for any of their hotels? Are there blackout dates?

•   Rewards program: You’ll want to look at the earning rate for the rewards program. Also investigate where there other perks, such as automatic upgrades, complimentary wifi and breakfast, and extended checkout. Some hotel credit cards even feature an anniversary bonus.

•   Sign-up bonus: Some cards feature an attractive sign-up bonus. For instance, you might earn a free night’s stay for simply signing up, or points if you spend a certain amount within the first few months after opening your account.

•   Additional perks: Beyond the basics, a hotel credit card might offer extras like credit card travel insurance and airport lounge access.

•   Credit card tier: As mentioned, a single hotel credit card might have several tiers to choose from. The higher the tier, the quicker you can earn points, and the more opportunities to earn points. Plus, higher tiers usually come with more perks. However, higher-tier credit cards also can be harder to qualify for. You might need a stronger credit score, higher income, and lower debt-to-income ratio than you would to qualify for a lower-tier card. Plus, a higher annual fee might apply.

•   Annual percentage rate (APR): If you plan on carrying a balance on your card, it’s particularly important to understand the APR of the card. Further, look at the terms and fees. What will you be charged for a late payment? Are there foreign transaction fees? Some credit cards, such as SoFi’s credit card, charge no foreign transaction fees.

•   Fees: If the hotel credit card comes with an annual fee, will you use it enough to offset the fee? Take the time to crunch the numbers before committing.

Recommended: Credit Card Miles vs. Cashback

Advantages of Hotel Credit Cards

When weighing whether hotel credit cards are worth it, consider some of these potential advantages:

•   Faster rewards earning: Compared to a hotel’s loyalty program, you’ll earn points faster with a hotel credit card. Plus, with a hotel credit card, there are usually more opportunities to earn rewards, as you rack points whenever you purchase something with your card. You might also earn additional points for booking at the hotel using your card.

•   Additional perks: As mentioned, a hotel credit card might come with added benefits, such as free internet, extended checkout, complimentary breakfast, and room upgrades.

•   Travel-related benefits: You might be able to take advantage of trip protection, credits that you can use to pay for room service or spa treatments, and credit toward Global Entry or TSA PreCheck.

•   Automatic upgrade to elite status: If a card offers an automatic upgrade to their hotel program’s elite status, you might be privy to room upgrades, credits toward room service, or concierge services.

Recommended: What Is an International Credit Card?

Disadvantages of Hotel Credit Cards

Here are some downsides of hotel credit cards to consider:

•   Limited uses: Because hotel credit cards are co-branded with a specific hotel brand, you can only use the rewards and perks when you stay at that particular hotel. Plus, there might be blackout dates, meaning you can’t use your benefits on those particular days, which are usually during times of high demand.

•   Possible annual fee: A card might come with an annual fee. The higher the tier, the higher the annual fee, if one applies. However, there’s a chance you could dodge this by focusing your search on no annual fee credit cards.

Who Should Open a Hotel Credit Card?

Wondering if a hotel credit card is worth it? If you’re someone who travels frequently and enjoys staying at major hotels as opposed to an Airbnb, then a hotel credit card could be a good idea. You’ll want to make sure you use the card enough to rack up points accordingly, and understand all the perks so you can make the most of them.

If the card comes with an annual fee, determine first whether the cash value of your points is enough to justify the cost. This could influence whether opening a hotel credit card makes sense.

How Redemptions and Earning Rates Vary on Hotel Credit Cards

The “earn and burn” rates for this category of rewards credit cards can vary greatly. Some offer 0.5 cents a dollar, while others over 5 cents a dollar and upwards. Plus, higher-tiered cards typically make it easier for you to earn points more quickly.

As no two hotel credit cards are alike, before deciding on a hotel credit card, look carefully at how you can earn points and how many points you can earn for certain types of purchases. By looking into how you can redeem your rewards and if there are any restrictions, you can also figure out how to make the most of your card.

How to Find a Hotel Credit Card

You might receive a hotel credit card offer via mail or in your email inbox. But your options aren’t limited to offers you’re preapproved for. Rather, the easiest way to find a hotel credit card is by way of an internet search. You can start by searching for your favorite hotel brands to see if they have a co-branded credit card available.

From there, you’ll want to narrow it down to a few options and compare how those hotel credit cards stack up against one another.

The Takeaway

Hotel credit cards are a category of rewards credit cards that allow you to earn hotel points through your spending on the card. You can then use those points toward hotel stays and other perks at the hotel chain affiliated with the card. When shopping around, you’ll find that there are a slew of options for hotel credit cards. It’s important to review details like the card’s rewards programs and other perks, as well as the APR and fees involved.

In some cases, after weighing the advantages and drawbacks of hotel credit cards, you might decide a hotel credit card isn’t worth it for you. Instead, a more general rewards credit card could be a better fit. The SoFi Credit Card, for instance, allows you to earn cash-back rewards on all eligible purchases that you can then use to save, invest, or pay down eligible SoFi debt.

FAQ

Does my marital status matter in a hotel credit card?

By law, credit card companies cannot consider your marital status when determining whether to offer you a credit card. By extension, whether you’re married or not doesn’t affect your odds of getting approved for a hotel credit card, nor should it impact your terms, rates, or benefits.

How much is charged by hotels on your credit card?

A hotel might charge your credit card when you book a room, check in, or at checkout. When your card is charged might depend on how you made your reservation and the hotel’s policies. If in doubt, read up on the hotel or booking platform’s policies.

Is your credit card charged when you check out?

If you’re booking for a prepaid stay, your credit card will be charged at the time you make your reservation. If it’s a standard booking, then the hotel will charge your credit card at checkout. Any incidentals — think room service, massage treatments, and meals at the hotel — will be charged at checkout.

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Photo credit: iStock/Prostock-Studio

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points toward active SoFi accounts, including but not limited to, your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, Student Loan Refinance, or toward SoFi Travel purchases, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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