The unbeatable benefits of the VA loan program aren’t bestowed on every property that catches a military buyer’s eye.
In order to garner VA approval, every home must undergo a VA appraisal. And although the VA appraisal has a reputation for being rigorous, its intentions are honorable: ensuring that homes purchased by veterans are fiscally and structurally sound.
So how tough is the VA appraisal? In this post, we’ll explore three factors that can influence the rigidity of any VA appraisal: VA appraisal guidelines, the appraiser assigned to the property and the individual lender.
Any appraisal will help a lender determine a property’s value. But VA appraisals go beyond conventional appraisals by incorporating a second function: ensuring that homes meet the VA’s Minimum Property Requirements (MPRs).
Veterans need homes in good repair, not dicey money pits. In pursuit of that goal, MPRs establish basic standards for a home and its contents. Electrical and plumbing systems must be in good condition, roofs must be defect-free and basements must be dry. Homes that fail to measure up to VA MPRs can’t be financed through the VA loan program.
VA appraisal guidelines can be strict and can eliminate fixer-uppers from contention. Many of the guidelines can be frustrating for military buyers who are considering older homes in need of renovation.
But it’s important to note that VA appraisal guidelines aren’t as different from modern conventional appraisal standards as they once were. Thanks to the housing market meltdown, some of the erstwhile differences between VA and conventional appraisals have been leveled. VA lenders have always been hesitant to risk funds on ramshackle properties. More conventional lenders are headed in that direction and tightening purse strings for properties in need of serious repair.
Every VA appraisal originates from the same list of MPRs. But the results of any appraisal can depend on the appraiser assigned to the property.
Some MPRs are very specific, but others allow room for interpretation. The VA instructs appraisers to watch for “defective construction,” but doesn’t specify what qualifies as “defective.” Properties must be free of safety hazards, but the VA stops short of providing a comprehensive list of safety threats.
Those vague guidelines mean that VA appraisers often have to make judgment calls. And depending on the appraiser and the property, that flexibility can either help or hinder a sale.
The “toughness” of any particular appraisal also has a lot to do with a lender’s own policies. In issuing a VA loan, a lender can choose to add any number of property restrictions. Some lenders are extremely strict, while others are more accommodating.
For example, while the VA allows mobile home purchases through the VA loan program, many lenders will refuse to take a chance on these properties. Even the most flawless appraisal couldn’t convince most VA lenders to issue a loan for a mobile home.
The VA appraisal is certainly important to a lender. Properties that don’t meet all VA criteria are rejected by the program. But the appraisal is never the sole determinant of financing. Any property — immaculate or not — can fail to pass a lender’s own litmus test.
If your buyer is considering a VA loan, make sure you’re up-to-speed with VA property guidelines. Pursuing an ineligible property is a poor use of your resources and isn’t fair to your military clients. Provide the best service possible with a basic understanding of VA MPRs and VA loan criteria.
It’s also important to work with an experienced VA lender. VA-savvy lenders have intimate knowledge of every VA regulation and can provide immediate property guidance to military buyers. Our partners at Veterans United Home Loans work exclusively with VA loans and can provide your military clients with a quick and efficient financing experience.
We want to hear about your experience with VA appraisals. What advice would you recommend for buyers and fellow agents?
Photo courtesy of John Picken