VA Loan Inspection Requirements: A Comprehensive List for Homebuyers
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Summary:
The Department of Veterans Affairs (VA) requires your future home to meet minimum property requirements and property valuation before you can get loan approval. You should expect a VA appraiser to evaluate your home. Your home must undergo a VA appraisal checklist and meet the standards as required by a VA inspection. Read more to learn about the requirements and what to do if your home does not meet the VA loan appraisal and inspection requirements.
Buying a home can be daunting and complicated, especially if you are a first-time homebuyer. As a buyer, you need to meet minimum credit requirements. And if you plan on securing a loan through the VA for your home mortgage, your home must meet some conditions before the mortgage is approved. These are called VA Minimal Property Requirements (MPRs), and they ensure that military families are in secure and safe homes.
In determining if your home meets these MPRs, your VA lender will request an appraisal process from an independent VA appraiser. Once your house passes the appraisal process, your loan will be approved. Let’s dive into the specifics of the requirements of VA appraisals.
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Why should I choose a VA loan?
You may be wondering why you should secure a VA loan over a conventional loan. According to Sam Cohen, an investment expert and founder of US Mint Gold,
“VA loans can be an excellent option for eligible individuals, primarily due to their generous terms. For starters, VA loans often require no down payment, making homeownership more accessible for veterans. They also tend to offer competitive interest rates and do not require private mortgage insurance (PMI), which can add a significant cost to other types of home loans. Furthermore, the VA provides a level of assistance to borrowers having difficulty making their mortgage payments, offering more protection than typical loans.”Click to Tweet
Learn more about your options from SuperMoney’s How to Finance a House.
What is a VA appraisal?
The VA appraisal process ensures the home is an adequate living space suitable for veterans and their families. A VA home loan appraisal consists of two parts.
Evaluation of appraised value
The VA appraiser will assess the home’s property value or its fair market value. This process protects you as a homebuyer by ensuring you are not overpaying for a home. It also protects the lender by ensuring the collateral value of your home in case of a default.
VA home inspection
While VA appraisers will not conduct a complete home inspection, they will ensure that homes meet MPRs and will not become physically or financially dangerous for homebuyers. In other words, a VA appraiser makes sure your new house is in good enough condition and will not become a money pit!
Step-by-step appraisal process
Before getting into the specific minimum property requirements, let’s summarize the VA appraisal process.
The VA appraisal process
- The VA loan officer will order an appraisal.
- The VA appraiser will conduct a home inspection to assess the value and condition of the home and determine whether it meets the VA’s minimum property requirements.
- If the home meets the MPRs, you will be issued an appraisal within 5–14 days showing your home’s value. The appraisal is good for six months, and you can now secure a VA loan for the appraised amount.
- If there are problems with the appraised value or property requirements, you will have to decide whether you want to continue with the loan. If so, your home must undergo updates, and the appraiser will have to return.
VA appraisal vs. home inspections
It is common to confuse an appraisal with a home inspection. While your home will undergo an inspection during the appraisal process, the VA does not require a complete home inspection.
The MPRs, as required by the VA appraisal requirements, only identify surface-level issues but do not identify every problem with the home. The VA appraiser is not trained to do a complete home inspection.
A home inspection will assess the home’s overall structure, such as the roof and foundation, against local building codes . This will ensure that there are no current problems and that future issues are unlikely.
Pro tip
The VA MPRs may miss some structural issues with the house, so it may be a good idea to opt for a home inspection on top of the VA appraisal.
VA minimum property requirements
Let’s dive into the MPRs as determined by the VA. These MPRs aim to ensure the property’s sanitation and safety.
Space requirements
The space must be large enough for you and your family. There is no minimum space requirement, but the VA will assess the property based on whether it has enough living space, bedrooms, bathrooms, and cooking space to be hygienic.
Access
The property has to be safely accessible year-round in all weather conditions by foot or vehicle. There has to be an accessible public or private road, and dirt roads do not fulfill the VA loan inspection requirements. If it is a private road, access must be protected by a permanent easement or right-of-way, which means it will not be blocked or possessed.
If the home has multiple units, each unit has to be accessible without going through another unit or different property.
Encroachments
No part of the property can encroach on another property, including the property’s garage, utility easement, or road.
Drainage and topography
Water must drain away from the home without building up and pooling on the site. There should also be no threats of falling rocks, mudslides, or avalanches.
Home structure
The home structure must be well-managed and free of cracks in the terrain and foundation.
The roof must have at least three years of viable life and moisture protection. Crawl spaces, attics, and basements must be ventilated and accessible without debris and hazards.
The home should be free of pests such as wood-destroying insects, mold, and mildew. The appraiser will look for issues that compromise the home’s stability or cause damage to the occupant’s health.
Hazards
The appraiser will look for threats to the individuals’ and property’s physical health and safety. Threats include flood zones, sinkholes, and environmental contaminants such as radon gas, asbestos, and lead-based paint.
Water supply, sewage, and sanitary facilities
The property must have year-round access to potable water that is safe for drinking and hot water for sanitary usage, such as showering. There should be appropriate sanitary facilities for all family members and functioning sewage disposal.
Properties with individual water supplies, such as a well, may be subject to water quality analysis to ensure the water is safe for drinking, using a filtration or chlorination system if needed.
Gas, electricity, and other utilities
The home must have working utilities, including electric, gas, and HVAC. The air conditioning must be able to cool the entire house in the summer, and the heating must be able to heat the whole home in the winter.
Multiple units can share these utilities if the property is multi-unit, as long as each unit has its own separate shutoff.
What happens if there are problems in the VA appraisal?
If there are problems with your VA appraisal, it likely falls into one of two camps: an inability to meet the minimum property requirements or the appraisal value being too low.
Problems meeting minimum property requirements
If your home does not meet the minimum requirements, you have one of three options:
- Cancel the loan because the home is deemed to be unsafe or unsanitary.
- Request that the seller address the issues so the VA appraiser can conduct a new appraisal and approve the changes.
- Request an MPR waiver that the VA and the lender would approve. Importantly, there must not be significant sanitary or safety issues.
Pro tip: if the home needs repairs, make sure the VA-loan route is your best option
Steve Nicastro from Clever Real Estate suggests that homebuyers consider fixing up the property shop around to different lenders. He says,
“While VA loans may be eligible for such properties, the process is usually much more complicated than buying the home using conventional loans. For example, the VA may require repairs before closing, and all repairs likely have to be made by a VA-approved contractor. In this case, either a conventional loan and then using personal funds to make the repairs or an FHA 203(k) loan which wraps repair costs into the mortgage, may be the better route.”Click to Tweet
Problems with the valuation
If the property value is less than the sales price you agreed to pay, the VA will not finance the loan. This precaution ensures you do not owe more than the home is worth. In this scenario, you have various options:
- Ask the seller to lower the selling price to the home’s fair market value.
- Cover the difference by making a down payment. Known as paying the appraisal gap, this will ultimately cause you to invest more in the home than it is worth.
- Cancel the sale and start looking at different homes.
FAQ
Are there any particular areas of the property that the VA loan inspection focuses on?
The VA loan inspection will inspect the entire home but will not be as thorough as a full home inspection. The minimum property requirements focus on ensuring a home free of hazards, with adequate roofing, functioning utilities, and lack of structural damage.
Is a home appraisal conducted as part of the VA loan inspection process?
A VA home appraisal is always required for a VA home loan and will be conducted as part of the VA loan inspection requirement.
Are there any restrictions on the type of properties that qualify for a VA loan inspection?
To meet the VA loan requirements, the property has to be a primary residential dwelling of no more than four units. The land may have more than one parcel or owner, and there is no maximum acreage.
Notably, VA loans do not work for investment properties. At least, they do not work for properties purchases purely as investments, since they must be the buyer’s primary residence. The ability to purchase properties with up to four units does allow you to generate income from the extra units since you only have to live in one of them.
Are there any specific conditions or repairs that must be met for a property to be eligible for a VA loan?
The property must meet the minimum property requirements set by the VA. The property must be safe and move-in ready with functioning utilities. Find the full list of specific conditions here.
Can the cost of required repairs be rolled into the VA loan amount, or must they be addressed before closing?
If repairs are needed to meet the minimum property requirements, the owner must make the repairs before the loan can be closed. While you cannot use the traditional VA loan to make these repairs, you can apply for a VA renovation loan, which allows you to roll the renovation costs and the home purchase into one. Find full details about VA renovation loans here.
Key takeaways
- An appraisal is required to secure a VA loan. The appraisal process protects you as a buyer from financial and physical harm.
- The VA appraisal report will include the estimated value of your home, as well as an evaluation of the safety and sanitation of your home. The home inspection looks at your future home’s structural integrity and utility effectiveness.
- Ensure you determine that a VA loan program is the best option for you as a buyer. While the benefits of no down payment and competitive interest rates are good for some buyers, the stricter requirements might not be for everyone.
What next?
Your appraisal is approved; congratulations! You can start the process of closing your mortgage. Closing can be complicated, so head on over to SuperMoney’s closing tips and tricks to get prepared!
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