Home Inspections and VA Loans: What You Need to Know
VA loans provide an affordable way for many military veterans to acquire their dream homes. They can provide financing of up to 100 % of your home's value than most other mortgages. Usually, your focus as an applicant would be to ensure you meet the set qualifications for borrowers.
However, it does not end there. Your house needs to qualify too. There are set minimum property requirements (MPRs), and if the house you want to buy does not meet those, your application will not be successful.
The VA home inspection and hope appraisal processes come in handy.
The VA loans program aims to get veterans and service members in safe, sound, and modern standard homes on active duty.
For a home to pass the qualifications of the VA loan program, it should meet the minimum property requirements and have a value that matches or is more than the loan amount.
An appraisal is conducted to establish the value and evaluate the home's condition. Thus, the appraisal has both valuation and inspection elements.
In valuation, the appraiser verifies whether the home you are buying has sufficient value to merit the loan amount you are seeking.
The appraiser determines this value by comparing the home to similar ones in the neighborhood and the going market rate.
The inspection element aims to establish that the home is in good condition for living without issues like dry rot and infestations.
The process starts once you have found your desired home, got a contract from the seller, and submitted a mortgage application to a lender authorized to give VA loans.
Once you have done all the above, the following steps follow;
The loan officer handling your application orders the VA appraisal and arranges for the appraiser to visit the property.
The appraiser arrives on the scheduled day, makes a home valuation, and assesses its condition against the VA's MPRs.
The loan officer gets the appraiser's report.
If the valuation justifies the loan amount and the house meets all the requirements, the appraisal is complete, and your loan application moves to the next stage.
- Should the home fail to qualify but you want to continue with the loan, you have to arrange for another appraiser visit after making the necessary adjustments and updates.
How long does a VA appraisal take?
There is no fixed VA appraisal wait time as it varies with the location. Usually, it takes a minimum of 7 days before you get the valuation notice and the MPRs assessment from the VA lender.
At times it can take even 21 business days. If you operate in a market with higher demand for appraisals, you will have longer waiting periods.
The long waiting period is another reason why most buyers using VA loans choose to have their own private VA home inspection to know early enough whether to proceed with the loan or not.
It is a unique service and will cost you additional fees if available. If time is an issue, you can also ask for an appraisal in a rush.
It is important to remember that you will also need a VA appraisal if you are to close a cash-out refinance. However, no VA appraisal is required if you are getting Interest Rate Reduction Refinancing Loan (IRRRL) since your home is already approved.
The va.gov page has valuable resources to help you know your county's appraisal fees and typical waiting times.
VA Minimum Property Requirements
It is already clear that a significant part of the VA appraisal process is to ensure you get a home that has modern and safe living conditions.
The MPRs exist to form a basis for the evaluation. Most of them are basic requirements that would be a deal-breaker for any home buyer with things like;
Sufficient living room space.
Provision of cooking and dining facilities.
Safe and sufficient sleeping, etc.
Does the home meet local and HUD building codes and requirements?
- Is it structurally sound, and does it meet standards for a permanent home?
The minimum requirements further consider other amenities and aspects of the house. A VA appraisal checklist covers the following too;
Heating and Electricity
Considerations under this segment include;
The house should have electricity in all areas for lighting and use in equipment.
If the home uses a wood-burning stove, it should have a backup heating system to maintain it at 50 degrees. Why 50? Because it is above the temperature at which pipes can freeze, burst, and flood your home.
- Solar systems used to heat the water or home should have conventional backups.
Underwater, the following are the minimum standards;
The home should have safe drinking water and a water heater, and it should be connected to a functioning septic tank system, either private or public.
If the home has a well instead of public water, you will need a water quality analysis to determine if the water is safe for drinking.
- If the home is using a community well, you must prove that the water is sufficient for all the homes served and is delivered on an ongoing basis and at an affordable cost.
Roof and Crawl Space
The following are the primary considerations for roof and crawl space;
All crawl spaces should be easily accessible, without any debris, and well ventilated.
The attic should have proper ventilation.
- There should be no leaks in the roof, and it should have viable years left in its lifespan.
Should there be an issue with the roof, the VA lender may need to order a roof inspection besides the home inspection or appraisal to determine the years the roof still has in its lifespan.
Utilities and Multi-Unit Homes
The appraisal for multi-unit homes will cost more and take longer than single-unit homes. Some of the primary considerations are;
There should be a separate shut off for each unit where units share utilities like water, electricity, gas, and sewer when the same VA loan covers them.
- The laundry or storage must be sufficient to be shared in cases of two or four units.
Access to the home should be possible by foot or car from a private or public street.
Access to the home should be possible all year round.
- In the case of multi-unit properties, you should be able to access each unit without trespassing on another unit or property.
Constructive Deterioration and Defects
The house should not have any decay or defective construction.
The appraiser will also check for any wood-destroying insects like termites, as they can cause significant damage to the foundation.
Use of Lead-Based Paint
This issue affects older houses, those built before 1978. They likely used lead-based paint; thus, the appraiser will require paint repairs.
It's even more crucial if there are peelings or chippings on the pain since they pose a high lead poisoning risk.
The Home's Location
The location of your home is also of interest to the VA appraiser. Two main issues are;
Homes located on a gas or petroleum pipeline easement area are likely disqualified from VA loans.
- Houses too close to high-voltage electric lines may not be eligible for VA loans.
Manufactured homes have extra requirements on top of the standard MPRs. The main ones are;
They need to be permanently fixed to a foundation.
Depending on the geographical location, the house may be required to have special bindings to resist hurricanes and earthquakes.
- It may also be a requirement to have permanent skirting and a vapor barrier. A skirting is a metal or wood enclosure around the house's foundation. A vapor barrier is a continuous plastic cover on the bared earth in a crawl space.
What about a VA home inspection?
A VA home inspection is not a requirement from the lender.
However, it is recommended by industry experts since it allows you to choose whether to purchase a house or not based on complete information.
What is the difference between a VA home inspection and a VA home appraisal?
First, the home inspection is not a requirement for you to qualify for a VA loan, while a home appraisal is mandatory. Secondly, the lender is the one who orders and schedules an appraisal picking an independent appraiser.
On the other hand, you are the one who looks for a home inspector and plans for when they will arrive at the property.
You check for things like plumbing problems and a complete roof inspection with a home inspection, which are not available in the appraisal.
Finally, a home inspection does a more thorough examination of the house, unlike an appraisal which focuses on the minimum property requirements.
Who pays for home inspection and appraisal?
The home buyer pays for both the inspection and appraisal of the house. The home inspection cost is usually paid before closing, while the lender bundles appraisal costs into the closing costs.
Besides providing you with a comprehensive assessment of the home you are taking, a VA home inspection is faster with no wait times as you are the one organizing everything.
Thus, you can know beforehand whether you want to go on with the application for that particular home or you will look for another, saving you the time you would have waited for the appraisal and possible rejection.
Here is a look at the inspection checklist, and while some may overlap with the appraisal, you get a more holistic assessment with a house inspection. The main items are;
The structure of the house - This part of the inspection looks to establish if the home's construction is sound. It covers the walls, the foundation, the ceiling, the roof, and floors.
House exterior - There is plenty to inspect on your house exterior and which could go wrong. An inspection determines the life of items like the windows, siding, and trim. It also looks at the condition of features like fences and exterior lighting. Further, an exterior inspection evaluates the home's drainage based on the elevation and grade. It also considers the condition of landscaping.
The condition of the plumbing - A thorough inspection of the plumbing will identify the materials used to make the pipes and verify whether they conform to current standards. The inspection also checks for leaks in toilets, faucets, showers, and sinks and determines whether these areas are in good condition or due for repairs.
Home systems - Inspections also look at the conditions and suitability of various home systems. These include the chimney, fireplaces, water heaters, furnaces, HVAC units, and septic systems where they are present. They determine if these systems are functioning correctly and if they meet modern requirements.
Roof and attic - The inspection looks at the stability of the roof, its remaining lifespan, and any leaks. The inspector also looks at the framing, flashing, gutters, ventilation, and insulation. All these must be in great shape and stable while matching current standards.
Electrical setup - The inspector will also look at the electrical setup starting with the wring to ensure no hazards and that the wiring is properly grounded. The inspector also looks at the main electrical breaker, the ceiling fans, light fixtures, and the main electrical breaker.
- Appliances - Home inspections also cover appliances checking the condition of appliances in the house like built-in microwaves, smoke detectors, ranges, garbage disposal, dishwashers, and all relevant appliances present in the home. The inspection looks at the need for any repairs, upgrades, replacements, energy efficiency, and their lifespan, among other things.
Getting the right home inspector
Considering the significant role of the inspector, you should get a professional for the task. Ensure the inspector guarantees their work.
If you discover something later that was supposed to have been covered by the inspection, but wasn't, then you do not bear the loss and have some remedy.
Most professional inspection companies compensate for repairs on the things they missed when they should have identified them.
Conducting a VA home inspection is that you receive a comprehensive and objective assessment of the home you are about to buy.
It is important to remember that not all home inspectors provide the same levels or breadth of service, so doing some early verification will help you get the most for the costs.
Here are a few tips on how to get the right home inspector.
Get recommendations and referrals - your friends and relatives who have recently purchased homes in the neighborhood could give you recommendations for people they used. You also have real estate agents and loan officers who may have contacts in the business. They can tell you beforehand the range of services the inspection service offers.
Use trade groups - you can also look at trade groups like the American Society of Home Inspectors or the National Association of Home Inspectors. These organizations always have local lists. You also assure that you will get a professional since they require professional certifications for membership and need high standards from their members.
Ask for qualification - there are different VA home inspection professional requirements for each state. You can get from the real estate agent or the local trade group and ensure the inspector you hire meets these qualifications.
Ask for a sample inspection report - you will only tell the services the inspection service offers by looking at the sample report. The report should have items like images of the problem and recommendations to buyers. It will also tell you about the inspector's experience.
- Agree about the cost - the home inspection cost varies depending on the company, your location, and the size of the home. Estimates from the US HUD place the average cost at $300 to $500.
Handling VA Appraisal Problems
VA problems fall into two main areas. The home's valuation shows it does not justify the amount you are borrowing, or the home does not meet the MPRs required for the VA loans.
If you have an issue with the valuation, here are a few ways you can handle that;
Request for an appraisal do-over, you can ask for a reconsideration of value if you think the first appraisal is wrong and have new comparable sales. Otherwise, this cannot help since the appraiser will still arrive at the same value.
You could also ask the seller to reduce the price to match the appraiser's market value. It may, however, not work in a hot market and against other buyers making cash offers and significant down payments.
You can cover the difference in value on your own, allowing the lender to treat it as a down payment and the loan to cover the rest.
- You may finally be forced to choose another home if all the above fails.
In case the issue is with the MPRs, then consider the following;
Ask the owner to make the fixes where the problem can be fixed by minor repair work.
Where the repairs cover significant problems which may take time to fix, request the owner to deduct the cost from the sales price, and you can place that money in an escrow account when closing to cover the costs once you buy the house.
- If you disagree, you will have to look for another home.
Knowing how the appraisal process goes will help you make the proper preparations. The VA home inspection is also vital for a more comprehensive look at the house.
You will be meeting the costs for both, so you should budget for them along with the overall cost of the house.
With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.
About Author - Phil Ganz
Phil Ganz has over 20+ years of experience in the residential financing space. With over a billion dollars of funded loans, Phil helps homebuyers configure the perfect mortgage plan. Whether it's your first home, a complex multiple-property purchase, or anything in between, Phil has the experience to help you achieve your goals.