What to know about VA loan appraisals

A VA loanva-hl000068 is a type of mortgage backed by the Department of Veterans Affairs (VA) and available to eligible current or past service members and eligible surviving spouses. When applying for a VA loan, the prospective property must undergo a VA appraisal to ensure it’s being valued accurately. Here’s what to know.

What is a VA loan appraisal?

A VA loan appraisal is a professional assessment to determine a home’s value. Whether you apply for a VA loan or any other type of mortgage, your lender will likely want to evaluate the property. The home appraisal helps determine the fair market value (FMV) and advises the borrower if they are paying more than the home is worth. It also helps ensure the property meets some basic health and safety standards.

A VA loan appraisal serves the same purpose, with a few additional details. First, a VA appraisal can only be conducted by an approved VA Fee Appraiser who is registered with the VA. Second, the home must meet specific Minimum Property Requirements (MPRs) in addition to meeting the basic health and safety requirements other loans carry.

How does a VA loan appraisal work?

The appraisal ordering process for VA loans works a little differently than other types of loans. Typically, the lender orders their own appraisal through a specific vendor that they currently work with. For VA loans, the lender sends a request to the VA for an appraisal to be ordered and performed. The VA then selects an approved VA fee appraiser to complete the appraisal. The VA does not permit the lender to manage the ordering or scheduling process and handles the appraisal process for the VA customer and lender.

Appraisal fees are also closely monitored by VA, and the lender must agree to the fee prior to completion of the appraisal. The fee is dependent on the location and complexity of the property being appraised. The VA provides a fee schedule and sets limits to the amount that can be charged to the VA loan customer.

VA appraisal requirements

As you’ve learned, VA loan appraisal requirements are somewhat different from the standard appraisal you’d have for other types of home loans. While both assess the FMV of the property and ensure that it’s in decent condition, VA appraisals go a bit further with MPRs to ensure that veterans receive a quality home. Here are a few key MPRs to know:

• Electric, heating and cooling systems: The VA requires all electrical systems to be up to code, which may not be required by other appraisals.
• Roofing: The VA requires roofing to be in good condition and have at least a few years of remaining useful life. Standard appraisals typically only demand the roof be in good condition.
• Paint: The VA requires properties to be free of lead-based paint and not be peeling, while standard appraisals typically don’t have requirements for peeling paint.
• Radon gas: The VA requires newly construction properties to be tested for radon gas and for any high levels detected to be mitigated first. Standard appraisals don’t usually have requirements about radon gas.

What happens if the home doesn’t meet the requirements?

If a home doesn’t meet the VA’s requirements, there are generally three possible courses of action. You can try:

• Asking the seller to make the necessary repairs and upgrades to bring the house up to standard.
• Requesting the VA’s approval for an official MPR waiver. These are assessed on a case-by-case basis.
• Choosing another, more eligible property.

Another potential hiccup could be if the home meets the MPRs but the appraised home value estimate is below the selling price. In this case, you could try:

• Working with your lender to determine if a request for a reconsideration of value can be submitted to the VA. This highlights additional sales data from comparable homes in the area that might help establish a higher value for the home.
  
• Presenting the appraisal findings to the seller to see if there’s room to lower the price.
• Paying the difference out of your own pocket.
• Checking your contract for the VA Escape Clause that would permit you to cancel the contract without financial penalty.
• Finding another, more eligible property.

In summary

A VA appraisal is a necessary step if you’re trying to secure a VA home loan. This appraisal ensures that the loan is reflective of the home’s fair market value and that the borrower isn’t overpaying for the home. The VA appraisal additionally evaluates the condition of a property more stringently than other home appraisals might, although not as thoroughly as a Home Inspection. This helps ensure that homebuyers who currently serve or have served this country (and their families) are getting safe, quality homes for their money.