Even if you have an above average credit score, a fantastic debt-to-income ratio, and sizable collateral to boot, appraisals fortunately (and unfortunately) are still necessary in order 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 secondly, 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 Minimum Property Requirements on the front end can save you a lot of frustration as a VA loan qualifying homebuyer, which is why we’ve made this guide for you. We’ll be discussing what appraisals are in the first place (as opposed to inspections), how long appraisals take, and the Minimum Property Requirements necessary to get a VA loan.
As a veteran-owned company, our team of VA-loan experts at The Reichert Mortgage Team are here to help! We help hundreds of military families by informing them of the final steps of the VA-loan process: receiving an appraisal. After this, you will be home free!
Appraisals Versus Home Inspections
What Are Home Appraisals?
The first thing you should know is this: appraisals are not home inspections. An appraisal is a professional evaluation of your home that gathers vital information to ensure the asking price does not exceed the fair market value. Appraisals are carried out first by inspecting the home itself to see if it meets the MPR (more on that below), and is then compared to other properties of the same size, age, and location. It also takes into account the amenities of the home including the floor type, kitchen materials, square footage, etc. All this information is gathered into a report known as an appraisal, which deems the home is worth X amount of dollars.
Interpreting Home Appraisal Results
If the final dollar amount of the appraisal is higher than what the asking price on your home is, you’re good.
If the amount 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 VA guidelines.
Furthermore, an appraisal is mandated by the VA. You cannot get a VA loan without an appraisal because it ultimately ensures 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 the midwest compared to the east coast. Appraisers are certified professionals with backgrounds in real estate, home inspections, and other real estate-oriented backgrounds, who go through training in order to be certified, as per law in all 50 states.
Appraisers and inspectors have a lot in common, but they also have some key differences however.
What Are Home Inspections?
In contrast, a home inspection is an in-depth, granular look at your home’s physical condition. Home inspectors create reports with much more nuance, detailing the condition of your home’s architecture, plumbing, electricity, possible mold or radon, and more. Home inspectors however do not tell you the valued price of your home (or at least they shouldn’t) — they will simply give you an unbiased detailed account of your home, highlighting any looming problems, both immediate and long term.
This detailed account gives you an idea if the perfect home is, in fact, too perfect to be true.
Home inspections are not required for VA loans, however, we definitely recommend them in order to ensure you are making a good long term investment.
Meeting the Minimum Property Requirements for VA Loans
According to the VA, appraisals also determine whether your home meets the VA’s Minimum Property Requirements (MPR’s) necessary to close on the loan. These requirements ensure veterans and military families have a home that abides by the three S’s: safe, structurally sound, and sanitary. If the home you’re under contract for 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 the VA loan was made to help those finance a primary home, this does not include commercial buildings.
- Adequate Heating. Must be able to maintain a temperature higher than 50 degrees fahrenheit. Homes that use a wood-burning stove must rely on conventional heating to provide adequate heating.
- Water Availability. Safe water must be checked for safety. Disposable sewage must be able to safely be disposed of. Wells must abide by localized laws.
- No Health/Safety Hazards. No nuclear waste, radon poisoning; existing rail guards for stairs.
- Adequate Roofing. No major hail damage, holes, or caving roof.
- Easy Access to Home. No major obstructions to enter or exit the home.
- No Evidence of Termites. No Substantial wood-decay or termite infestation.
- Crawl Spaces are not Moist. No moisture in the basement, or signs of leaking.
The MPR’s will inspect all obvious repairs that need to be made, but it is not a guarantee of defects. The purpose of the MPR’s is 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 loan is impossible.
But don’t worry, you can fix these either by asking your seller to repair them, offer to pay for the repairs yourself, or simply walk away from the home. These items are not an immediate dealbreaker and can still be mediated to get your VA Loan approval.
How Long Does the VA Appraisal Process Take? The VA Appraisal Timeline
Report Is Created and Uploaded
While appraisers have an important job, they don’t actually have the final say on your loan – they are simply the ones making the report. After the report has been made, it is uploaded onto the VA’s web portal usually within fifteen days in Colorado.
Report is Reviewed
Following this upload, the report will be reviewed by either a VA approved appraiser, or a lender’s Staff Approved Reviewer (SAR). These official representatives of the Veterans Affair department have the authority to review the appraisal, and deem the estimated market value adds up, and if the home meets all MPR’s.
Notice of Value is Issued
In the best case scenario, within five business days, your lender’s SAR should issue a Notice of Value (NOV), 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.
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 the requirements, then you (or your appraiser) will have a chance to negotiate with the seller to lower the price of the home so that it is below the appraised value. If it does not pass the MPR’s, then you (or your appraiser) can negotiate to fix the repairs to close on the deal.
Possible setbacks from the appraisal process means you have to be very careful about what home you choose. It also means that if you’ve 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 | The Reichert Mortgage Team
The appraisal process can be frustrating, but that’s why it’s important to work with someone who knows the in’s and out’s of the VA loan process. Here at The Reichert Mortgage Team, we help hundreds of military families finance homes with great mortgage rates. We also consult with clients all the time on how to reduce their payments or interest rates through VA refinancing. Take advantage of your ally in this community of Colorado Springs by contacting us today! We would love to talk to you and answer any questions you may have.