Understanding the VA Loan Appraisal Process

One of the requirements for being approved for a VA loan is a property appraisal. If you don’t know what an appraisal is, how it works or what this process means for you, read on.

What Is a VA Appraisal?

A VA appraisal is just an appraisal performed by someone certified through the U.S. Department of Veterans Affairs.

An appraisal is simply a valuation of how much the home you’re trying to buy or refinance is actually worth. This value is established by looking at the house and comparing the asking price to recent sales prices for similar properties in the area. For example, three-bedroom ranches are compared to other three-bedroom ranches, usually within a mile or two of each other. This distance can be extended in a rural area where there’s more space between similar houses.

The appraisal is important to your loan process because you want to make sure you’re not overpaying for a home. Also, your lender cannot loan more than the home is worth.

In addition to assigning a value to the home, the appraisal checks for basic safety and livability conditions. We’ll get into that in a minute.

When Will You Need a VA Appraisal?

You’ll need an appraisal for most VA loans and many of the VA refinance options, but there are exceptions. One

You’ll need an appraisal for all purchase loans to establish a value for the property. The same is true for many of the VA refinance options. The exception is the VA Streamline refinance loan.

You may see a VA Streamline referred to as an interest rate reduction refinance loan (or IRRRL, pronounced “Earl.”) If you’re trying to lower your interest rate or change your term, you may qualify for this loan option. In some cases, it’s possible to skip the appraisal on an IRRRL. This option may also be helpful if you owe more on the home than it’s worth. You can refinance up to 120% of the home’s value with this option.

The Appraisal Process

Once you begin the VA loan process, your Home Loan Expert will be able to schedule a VA-approved appraiser for you. The Department of Veterans Affairs handles the scheduling and randomly assigns an appraiser to your property. Because it’s their job to ensure that the home meets minimum requirements set by the VA, appraisers must also guarantee that the home is safe and habitable. Typically, the appraisal is requested early in the VA loan process to ensure enough time to address any issues found during the appraisal.

Appraisal Issues and Things to Consider

Just as the VA has strict requirements for loan eligibility, it also has stringent rules for appraisers.

Appraisers must inspect the property inside and out. They are also required to select comparable homes, view the exterior of them and perform a comparative analysis. Typically, appraisers look for things like structural issues or any other problems that could impact a home purchase. The VA prefers that homes be move-in ready.

Typical issues that appraisers report include homes without an efficient and acceptable heat source. A heating system must maintain a minimum temperature of 50 degrees in the plumbing areas of the home. There must be adequate and code-approved electrical systems with all the proper fixtures. A leaky roof – or a roof that has problems – and windows that have broken or damaged frames and seals can be huge issues on an appraisal report.

Appraisers must include a location map, building perimeter sketches and photographs of either the sale property or the lot where a new home’s construction will take place. They also provide an itemized list of repairs to be completed for VA loan approval. This list also includes any corrections needed to make the property conform to regulations set by the Department of Veterans Affairs. Then, they must personally make the final-value estimate and sign their name to the report.

One big thing that’s unique to VA loans is a pest inspection, during which an inspector will check for insects that eat into wood, such as termites.

In many states, the seller is required to pay for this inspection. In certain states, the veteran can make this payment. If expenses are an issue for the seller, offering to pay for the inspection could help get your offer accepted.

Although other loan options require a pest inspection when an appraiser thinks there might be a problem, the VA requires that pest inspections be done in all but 11 states. Those states are:

• Alaska.
• Colorado.
• Idaho.
• Maine.
• Minnesota.
• Montana.
• North Dakota.
• Oregon.
• South Dakota.
• Wisconsin.
• Wyoming.

In certain states, inspections are only required in certain counties.

How Much Is a VA Appraisal and Who Pays?

It’s hard to say for sure how much an appraisal will cost because it depends on where you live and the characteristics of the property. If the appraiser must travel further to get there or has to inspect multiple units, it could cost you more. That said, appraisals might range between $250 and $600.

The veteran can pay for this or negotiate for the seller to pay as part of a package of seller concessions.

An appraisal doesn’t have to be a daunting step in your effort to buy a home. To help streamline the process, make sure your Realtor is well-versed in VA property guidelines. Having an agent who shows you properties that are ultimately ineligible for a VA loan is a waste of your time. It’s also important to work with an experienced VA lender. Lenders who have dedicated VA loan experience know the ins and outs of every VA regulation and can help guide you through the home-buying process with ease. If you follow these two suggestions, and educate yourself on the appraisal process, you’ll likely be able to refinance or get into that dream home in no time.