You’ll need a home appraisal if you use a VA loan to buy a property or tap into your home equity. The lender requires it to confirm that the home is worth the sales price and meets program guidelines. This guide dives into the role the VA plays in the appraisal process, what the VA appraisal entails, the typical timeline and the next steps once the appraisal is complete.
What is a VA Appraisal?
A VA appraisal is required when you use a VA loan, which is a mortgage product backed by the Department of Veterans Affairs (VA), to buy a home or refinance your current loan. A VA-approved appraiser performs to assess the property to determine its fair market value and confirm that it is safe, sanitary and structurally sound.
The Importance of Appraisals in VA Loans
For starters, lenders want reassurance that you aren’t overpaying for the home. It’s equally important that the property condition is up to par to help protect your investment.
Role of the VA and Lender in the Appraisal Process
Both the VA and the lender you choose play an integral role in the home appraisal process required to secure a loan.
Responsibilities of the VA
The VA establishes guidelines for the appraisal process to protect the financial interests of borrowers and lenders. Each time an appraisal is completed, the appraiser submits a detailed report to the VA for review. It is uploaded to WebLGY, the VA’s online system, and scored by the VA’s Appraisal Management System (AMS), and you’ll receive a Notice of Value (NOV) once the review is complete.
Lender’s Role and Responsibilities
Lenders initiate the appraisal process by submitting a request through WebLGY. Before they can approve a VA loan, a thorough review of the appraisal report is required to confirm the property adheres to VA loan program guidelines. However, if there are issues with the report, they must be resolved with the property appraiser before moving forward.
Understanding VA Appraisal Requirements
Below is a closer look at how VA appraisal requirements differ from those of conventional loans and what appraisers look for during the appraisal process.
What’s Different About VA Appraisal vs. Conventional Appraisal Requirements?
Homes purchased with VA loans must meet minimum property requirements (MPRs). However, these guidelines don’t apply to conventional loans. That said, both types of loans require appraisals to compute the property’s fair market value to prevent the borrower from overpaying.
What Do They Look at During a VA Appraisal?
VA appraisals hone in on four key aspects of the property, starting with the fair market value. The other areas of concern are the safety, structural integrity and sanitation of the home. More specifically:
- Is the home in livable condition and free of safety hazards?
- Is the roof, foundation and overall structure of the home sound and free of significant defects?
- Does the home have fully operational electric, plumbing and heating systems?
How a VA Appraisal Affects the Overall Home Buying Process
The results of the VA appraisal ultimately determine if the lender will extend the loan to you or if you need to renegotiate a better deal with the seller. An appraisal that comes in at or above the purchase price isn’t a cause for concern. But if it’s below this figure, you could face hurdles with getting the loan approved.
In this case, you can request a Reconsideration of Value (ROV) if you believe there’s an issue with the appraisal. You can also renegotiate to lower the home’s purchase price or pay the difference out of pocket if you really want the property, but the seller won’t budge.
Key Components of a VA Appraisal
Here’s a closer look at what’s involved in a VA appraisal and the requirements VA-approved appraisers must meet.
Property Eligibility Criteria
The VA has guidelines in place relating to the location, usage and type of property that qualifies for funding.
Properties that are residential and will be used as your primary residence are allowable. This could include single-family homes, condos and multi-family homes with up to four units, assuming you occupy one as your primary residence. However, vacation homes or rental properties are not permissible.
Minimum Property Requirements (MPRs) and Property Type Restrictions
Again, the home you want to purchase must meet the MPRs to qualify for funding. There are also other guidelines in place for manufactured homes and condominium units.
Appraiser Qualifications and Licensing Requirements
Home appraisals must be completed by VA-approved appraisers holding the proper certifications and licensure.
The VA Appraisal Process
When you reach the appraisal phase of the lending process, here’s a closer look at what to expect.
Requesting a VA Appraisal
As previously mentioned, the lender requests the appraisal through the WebLGY platform. Upon receipt, a VA-approved appraiser is assigned to complete the appraisal of the home.
Conducting the Appraisal
The appraiser visits the property to assess its condition and features and confirm that it meets the VA’s Minimum Property Requirements (MPRs). These standards ensure that the property is safe, sanitary and structurally sound.
Property Inspection and Market Analysis
The appraiser inspects the property and performs a market analysis. It involves comparing the home to similar properties in the area that have recently sold. The appraiser then considers factors such as location, size, condition and amenities to arrive at an accurate market value.
Appraisal Report
The appraiser compiles the findings into an appraisal report that includes details about the property’s condition, any issues that need to be rectified and its market value.
The report also provides a clear assessment of how the property is measured to meet VA’s minimum property requirements. The appraiser’s signature and VA ID are included to verify the authenticity and accuracy of the document. This report is then sent to the lender for review.
How Long Does the VA Appraisal Process Typically Take?
Most VA appraisals are completed in 10 business days, although it could take up to 21 business days in some instances. The timeline depends on the location and size of the home, along with local demand and availability of VA-approved appraisers in your area.
Who Pays for the VA Appraisal and How Much Does It Usually Cost?
The property appraisal will cost between $500 and $800, which you will pay at closing.
Common Issues Found in VA Appraisals and How to Overcome Them
VA appraisals often encounter issues related to the property’s condition and discrepancies in valuation. Below is a closer look at these hurdles and how to overcome them.
Property Condition Problems
The VA has strict Minimum Property Requirements (MPRs) to ensure the safety and livability of a home. Common property condition problems include leaky basements, inadequate heating systems, roof damage, outdated electrical wiring and pest infestations. Homes with these issues must be repaired to meet MPRs before getting approval.
Getting the seller to agree to necessary repairs can be challenging. Communication and negotiation are crucial. If repairs are extensive, you might need to adjust your offer or explore other homes that are in better condition.
Valuation Discrepancies
Valuation discrepancies arise when the appraised value is lower than the purchase price. This is problematic because the VA loan cannot cover more than the appraised value of the home.
To overcome this, you have a few options. First, you can request a reconsideration of value through the VA’s Tidewater process. This allows the appraiser to review additional comparable sales and market data to potentially adjust the appraisal.
If the reconsideration doesn’t increase the appraisal, you can ask the seller to lower the price to match the appraised value. Or you can consider covering the difference out of pocket to proceed with the purchase.
What Happens After the VA Appraisal?
Once the VA appraisal is completed, here’s what to expect: your lender will receive and review the appraisal report. Based on the appraisal and other factors, your lender will decide whether to approve your VA loan.
If the appraiser notes any required repairs to meet MPRs, these must be addressed. After repairs, the appraiser may need to conduct a re-inspection to confirm that the work has been done satisfactorily. This ensures that the property now meets all VA requirements.
Once the appraisal and required repairs are completed, the loan goes through final underwriting. During this stage, the lender ensures all documents are in order and conditions are met.
Upon final approval, you can move toward closing. This is the last step, where you’ll sign all necessary documents and finalize the purchase of the home.
Tips for a Successful VA Appraisal
Remember these tips if you’re looking to purchase or refinance with a VA home loan.
If you’re considering a home purchase:
- Understand the VA’s MPRs, as the property must meet the standards to qualify for funding.
- Work with a real estate agent who is well-versed in VA loans. They can provide guidance on MPRs, assist with negotiations and help you navigate the lending process more smoothly.
- Get a home inspection, as it can identify potential issues that might be flagged in the VA appraisal. Addressing these issues beforehand can save time and avoid delays.
If you’re considering a cash-out refinance:
- Prepare your home to look its best. Clean up any clutter, fix minor issues like leaky faucets, and maintain the yard. Minor improvements can make a big difference.
Most importantly, stay in close contact with your lender throughout the process. They can provide updates on the appraisal status and help resolve any issues that arise. Clear communication can prevent misunderstandings and delays.
FAQs About VA Appraisal Requirements
VA home appraisals follow strict guidelines to make sure the property is livable. The appraiser checks for issues like a functioning roof, adequate heating, and no health hazards. These standards help ensure the home is in good condition and a good investment for both the lender and the borrower.
Red flags in a VA appraisal include issues like unsafe wiring, structural damage and pest infestations. The appraiser will note these problems and require them to be fixed before approving the home for a VA loan. Other concerns can be peeling paint or inadequate access to safe water.
