For many veterans, the dream of homeownership is made possible through VA loans, a unique benefit offered by the Department of Veterans Affairs. Understanding the intricacies of VA loan inspection requirements is crucial for a smooth home-buying process.

 

Is A Home Inspection Required For A VA Loan?

One of the most common misconceptions about VA loans is whether they require a home inspection. Contrary to FHA loans, VA loans do not mandate a home inspection. However, it's worth noting that while they are optional, lenders often highly recommend them. In this section, we'll explore the reasons behind this recommendation and how it aligns with the broader VA loan process.

 

VA Appraisal V. Home Inspection

While "VA appraisal" and "home inspection" are sometimes used interchangeably, they serve distinct purposes in the home buying process. The VA appraisal primarily focuses on determining the property's fair market value, ensuring that the veteran is not overpaying, and assessing the property's overall suitability.

On the other hand, a home inspection goes beyond the surface, thoroughly examining the property to identify any current or potential issues. This section aims to clarify the key differences between these two critical steps in the home-buying journey.

 

VA Appraisals V. Conventional Appraisals

VA appraisals and conventional appraisals share common objectives, aiming to determine a property's fair market value, but they may differ in certain aspects. It's essential for homebuyers, especially veterans considering VA loans, to understand these similarities and differences to make informed decisions during the home-buying process.

 

Similarities

• Objective - Establish Fair Market Value (FMV):

Both VA and conventional appraisals primarily determine the fair market value (FMV) of a property. Appraisers evaluate various factors, such as the property's condition, location, and comparable sales in the area, to arrive at a fair and accurate value.

 

• Comparison to Comparable Properties:

In both types of appraisals, appraisers compare the subject property to recently sold comparable properties (comps) in the vicinity. This comparative analysis helps assess the property's value relative to similar homes in the market.

 

• Identification of Issues Impacting Value:

Appraisers for both VA and conventional loans look for significant issues that can either lower or enhance the property's value. Issues such as structural problems, safety hazards, or essential upgrades that contribute to the property's value are considered in the appraisal process.

 

• Third-Party Appraisal Ordering:

In both cases, the lender orders the appraisal from a third-party appraiser. This helps maintain objectivity and ensures that the appraiser is unbiased in determining the property's value.

 

Differences

• Minimum Property Requirements (MPRs):

One of the key distinctions lies in the Minimum Property Requirements (MPRs) enforced by the U.S. Department of Veterans Affairs for VA loans. VA appraisals include assessing whether the property meets these specific safety, soundness, and sanitation requirements. Conventional appraisals do not have equivalent MPRs.

 

• Inclusion of MPRs in the Appraisal Process:

VA appraisals explicitly include the evaluation of Minimum Property Requirements. The appraiser must confirm that the property meets these standards to ensure it is safe, sound, and sanitary for the veteran homebuyer. Conventional appraisals do not have a comparable set of requirements, although the appraiser may still note major issues affecting the property's value.

 

• Flexibility in Property Condition:

Conventional appraisals may be relatively more flexible when it comes to the property's condition. While the appraiser considers significant issues, there may be more leeway compared to VA appraisals, which are more stringent in evaluating the property's overall suitability for a veteran.

 

• Impact on Seller Concerns:

Sellers sometimes express concerns about VA appraisals, fearing that the MPRs might complicate the process. However, the appraisal should proceed smoothly if the property is well-maintained and meets these requirements. In conventional appraisals, while sellers may still need to address major issues, they do not face the specific set of MPRs required for VA loans.

 

VA Minimum Property Requirements (MPRs)

VA Minimum Property Requirements (MPRs) play a pivotal role in ensuring that homes financed through VA loans meet certain standards of safety, soundness, and sanitation. These requirements are established by the U.S. Department of Veterans Affairs, aiming to protect veterans from purchasing properties that may pose health or safety risks. Let's take a closer look at the key elements of VA MPRs:

 

Space Requirements

All homes financed through VA loans must have sufficient space to accommodate the needs of the veteran and their family. This includes appropriate living space, sleeping quarters, cooking and dining areas, and an adequate number of bathrooms. While the size of the home is not strictly defined, it should align with the VA guidelines and meet the family's requirements.

Access and Encroachments

Ensuring year-round street access to the property is a fundamental requirement. Additionally, any private roads leading to the home must have permanent easement and be managed by a homeowners association (HOA). The property itself must not encroach on neighboring properties, including structures such as garages or utility easements.

Hazards

The property must be free of natural hazards, including flood zones, sinkholes, and environmental contamination. Hazards can include but are not limited to radon gas, asbestos, and lead-based paint. Any threats to the physical health or safety of occupants, as well as issues affecting the structural soundness of the property, are carefully considered.

Water Supply, Sanitary Facilities, and Sewage Disposal

VA MPRs mandate year-round access to safe and potable water for drinking, bathing, and other sanitary uses. The property must have a reliable supply of hot water and sufficient sanitary facilities for all family members. Effective sewage disposal is also a requirement to ensure proper sanitation.

Gas, Electricity, and Other Utilities

Every VA-financed home must have adequate utilities, including functioning electrical and gas systems. The HVAC (heating, ventilation, and air conditioning) systems must be in good working condition. The home's heating system should effectively warm the entire dwelling in winter, and the air conditioning system must provide sufficient cooling during the summer months.

Home Structure

The structural elements of the home are closely examined. This includes assessing the roof and ensuring it has at least three years of remaining life. Crawl spaces, basements, and attics must be free from mold, mildew, pest damage, or other infestations. Proper ventilation and easy access to these spaces are crucial elements of the structural evaluation.

Dry Rot, Pest Inspection, and Other Deterioration Signs

Appraisers conducting the VA appraisal are required to report any damage caused by termites, pests, dry rot, or other defects that may compromise the structural integrity of the home. Identifying issues that could impact the stability of the property or pose risks to occupants is essential.

Proper Drainage

Adequate drainage is a critical aspect of VA MPRs. The property should be designed to channel water away from the foundation, and there should be no pooling of water on the site. Any drainage issues observed during the appraisal must be reported.

VA Financing Pools

While pools are allowed for VA financing, they must be in good working order. The appraiser is tasked with reporting any defects or hazards associated with the pool that could impact its ability to meet MPRs. Customary pools for the area can be included in the home's overall value.

 

What To Do About Problems With The VA Appraisal

Encountering challenges with the VA appraisal process is not uncommon, and knowing how to navigate these issues is crucial for a smooth home-buying experience. When problems arise with the VA appraisal, there are several strategic steps that borrowers can take to address and resolve them:

 

The Home Doesn't Meet Minimum Property Requirements (MPRs):

If the property doesn't meet the VA's Minimum Property Requirements, the buyer has a few options. One approach is to request that the seller address and rectify the issues identified during the appraisal.

This could involve necessary repairs or improvements to bring the property in line with the established standards. Alternatively, the buyer may choose to cancel the sale if the issues are significant and compromise the safety, soundness, or sanitation of the home.

Another option is to request an MPR waiver, which would need approval from the VA, and the lender, and should not compromise the safety or sanitary conditions of the property.

The Appraised Value Is Low:

Sometimes, the appraised value of the property may come in lower than the agreed-upon purchase price. In such cases, the buyer has a few viable options:

• Negotiate a Lower Sales Price: The buyer can negotiate with the seller to lower the sales price to align with the appraised value. Some sellers may be willing to accommodate this adjustment to facilitate the sale.
• Pay the Difference: If the seller is unwilling to lower the price, the buyer has the option to cover the difference between the appraised value and the agreed-upon purchase price in cash. This means the buyer is investing more than the property's appraised value, and careful consideration is needed.
• Walk Away From the Sale: If the buyer has an appraisal or financing contingency in the contract, they can choose to cancel the sale if the appraised value is significantly lower. This ensures that the buyer doesn't invest in a property for more than it's worth.

 

Bottom Line

In conclusion, understanding the nuances of VA loan inspection requirements is paramount for a successful and stress-free home-buying experience.

Mortgage Dove, a trusted partner in the mortgage industry, stands ready to assist veterans in realizing their homeownership dreams. By demystifying the intricacies of VA loans, Mortgage Dove ensures that veterans can confidently navigate the path to homeownership with clarity and assurance.