Even if you have an above-average credit score, a fantastic debt-to-income ratio, and sizable collateral, an appraisal is required for your lender to close your VA home loan. There are two major reasons for this: first, appraisals help determine whether your home’s contract price is fair, and second, VA appraisals ensure veterans and military families are buying homes that are safe, structurally sound, and sanitary (the three S’s). Understanding how appraisals work alongside the VA’s Minimum Property Requirements (MPR) can save you a lot of frustration as a VA loan-qualifying homebuyer.
This is why the Reichert Mortgage Team has put together a VA appraisal checklist. As a veteran-owned mortgage broker in Colorado Springs, our team of VA home loan experts are here to help! This appraisal checklist will discuss what appraisals are as opposed to inspections, how long appraisals take, and the VA’s Minimum Property Requirements necessary to get a VA mortgage. At the Reichert Morgage Team, we help hundreds of military members and their families by informing them of the final steps of the VA loan process, which is receiving an appraisal. After your appraisal report, you’ll be set to get your dream home!
Appraisals vs. Home Inspections
What are Home Appraisals?
The first thing you should know is that appraisals are not home inspections. An appraisal is a professional evaluation of your home that gathers vital information to ensure the asking sale price does not exceed the fair market value. Appraisals are carried out by inspecting the home itself to see if it meets the MPR and the home is then compared to other properties of the same size, age, and location. Appraisals also take into account the amenities of the home, including the floor type, kitchen materials, square footage, and more. All of this information about the home is gathered into a report known as an appraisal, which deems the home worthy of a certain amount of dollars.
Interpreting Home Appraisal Results
If the final dollar amount of the appraisal is higher than the asking price of your home, then you are good. If the value of the property is lower than the asking price, your lender cannot give you more than the appraised amount. However, you can use the appraisal as a negotiating tool to haggle your way into a better deal. Oftentimes, this can be handled between the appraiser and the seller of the home. A compromise can be reached, but your lender cannot give more than the appraised amount per guidelines set by the Department of Veterans Affairs.
An appraisal is mandated by the VA. You cannot get a VA loan without an appraisal because they ensure that the lender is not overlending. While the appraisal fee is technically your due to pay, your lender will order the appraisal for you once your home is under contract. Appraisal fees range from $750 to $950 with a 15-day turnaround in Colorado; although, they vary across the nation, especially in the midwest compared to the east coast. VA appraisers are certified professionals with backgrounds in real estate, home inspections, and other real estate-oriented backgrounds. These professionals undergo training in order to be certified, as per law in all 50 states. While appraisers and inspectors have a lot in common, they also have some key differences.
What Are Home Inspections?
A home inspection is an in-depth, granular look at your home’s physical condition. Home inspectors create reports with much more nuance that detail the condition of your home’s architecture, plumbing, electricity, possible mold or radon, and much more. Home inspectors do not tell you the valued price of your home. They will simply give you an unbiased detailed account of your home that highlights any looming problems, both immediate and long term.
This inspection is a detailed account that gives you an idea if the perfect home is too perfect to be true. Home inspections are not required for VA loans, but they are highly recommended to ensure you are making a good long-term investment.
VA Minimum Property Requirements
According to the VA, appraisals also determine whether your home meets the VA’s MPRs to close on the loan. These requirements ensure veterans and military families have a home that abides by the three S’s. If the contracted home has a “ding” for any one of these categories, repairs will be necessary before you can close. Big-ticket items that need to meet these property requirements include the following:
- Residential properties only
Because VA loans were made to help military service members finance a primary home, they do not include commercial buildings.
- Adequate heating
The home must be able to maintain a temperature higher than 50 degrees Fahrenheit, and homes that use a wood-burning stove must rely on conventional heating to provide adequate heating.
- Water availability
Water must be checked for safety. Disposable sewage must be able to safely be disposed of, and wells must abide by localized laws.
- No health/safety hazards
Homes must be free of health or safety hazards. For example, no nuclear waste or radon poisoning, and stairs should have existing guard rails.
- Adequate roofing
The home cannot have major hail damage, holes, or a caving roof.
- Easy access to the home
There must not be any major obstructions to prevent entering or exiting the home.
- No evidence of termites
There cannot be evidence of substantial wood decay or termite infestation in the home.
- Crawl spaces are not moist
The home will not meet MPRs if there is moisture in the basement or signs of leaking.
Veterans Affairs establishes MPRs to protect you and your family, as well as your home’s marketability. Generally speaking, all VA loan homes need to be move-in ready, or else finalizing the VA home loan is impossible.
If problems arise, you can fix these either by asking your seller to repair them, offering to pay for the repairs yourself, or simply walking away from the home. These items are not an immediate dealbreaker and can still be mediated to get your VA loan approval.
VA Appraisal Timeline
1. The Report is Created and Uploaded
While a VA appraiser has an important job, they do not have the final say on your loan. These professionals are simply the ones making the report on the home. After the report has been made, it is uploaded onto the VA’s web portal. In Colorado, this usually is completed within 15 days.
2. The Report is Reviewed
Following this upload, the report will be reviewed by either a VA-approved appraiser or a loan lender’s Staff Approved Reviewer (SAR). These official representatives of Veterans Affairs have the authority to review the appraisal, determine if the estimated market value adds up correctly, and if the home meets all of the MPRs.
3. The Notice of Value is Issued
In the best-case scenario, your loan lender’s SAR should issue a Notice of Value (NOV) within five business days, which informs your lender if you meet all the requirements to close the loan. If everything goes perfectly, then your home may be appraised and closed within 20 days in Colorado.
4. Clarification, Repairs, or Negotiations
On the other hand, if the SAR has questions or needs clarification on the appraisal, then this could take time. If your home does not meet all of the requirements, then you or your appraiser will have a chance to negotiate with the seller to lower the selling price of the home so that it is below the appraised value. If it does not pass the MPRs, then you or your appraiser can negotiate to fix the repairs to close the deal.
Possible setbacks from the appraisal process mean you have to be very careful about what home you choose. It also means that if you have made it this far then you have a better idea of what to look for when you go to buy a home with a VA loan.
If all goes well, the appraisal will be finalized and you will be well on your way to finalizing your VA home loan.
VA Loan Experts | Reichert Mortgage Team
The appraisal process can be frustrating, but that is why it is important to work with someone who knows the ins and outs of the VA loan process. Here at the Reichert Mortgage Team, we help families across southern Colorado finance their homes with great mortgage rates. We also consult with clients on how to reduce their payments or interest rates through VA refinancing. We are passionate about helping our Colorado community with their VA loan needs. If you have questions about VA loans or wish to talk to our expert team about the mortgage process, contact the Reichert Mortgage Team today!