VA loan appraisal requirements are not like a lot of the VA requirements you hear about. There’s no getting around this one. The VA loan system won’t give you their blessing for your VA loan mortgage without it. The good news is they have a large network of VA-approved appraisers and one of them will be assigned to your case. You don’t have to do much, but understanding the ins and outs of the appraisal will help you navigate the VA loan process.
We want to stress that the VA loan appraisal requirement is not optional. There are a lot of so-called VA requirements out there: credit scores, loan limits, etc. A lot of those requirements do not come from the VA but rather from the private lender who will be approving your loan. This is not one of those. The VA home appraisal process is required, so here is what you need to know.
VA Loan Appraisal Requirements Are Not an Inspection
It’s easy to mix up the two, but a property appraisal is not the same as a home inspection (though there might be some overlap). The appraisal is a financial look at the home and tries to establish how much the property is worth.
It does that by looking at comparable homes, nearby houses and coming up with a dollar figure. It also looks at the house to make sure it’s in good shape, i.e. that it is worth what the seller is asking for in terms of price.
Home inspectors look at the property in terms of functionality, and not financially. The inspection goes deeper and looks at every part of the house to determine if it’s move-in ready. It doesn’t look at what the property is worth.
It looks at what might need fixing or changing before the buyer moves in. The inspection protects the buyer from surprises that might cost a lot in the near future. For example, is the roof at the end of its useful life and will it need replacing soon? Or is the plumbing on the verge of bursting? Or is the foundation cracked and threatening the stability of the structure of the house?
To be sure, the VA appraisal looks at those things too because they affect the home’s value. A VA appraiser will look at roofs, electrical systems, HVAC units, as well as features of the house that increase the value such as number of bedrooms, number of baths and square footage. But the appraisal is there to protect the lender – and in this case the VA.
The home inspector is there to protect the buyer.
How Much Does a VA Appraisal Cost?
Generally, the VA appraisal fees can run between $525 and $1,500, depending on where you are purchasing your house.
In high demand real estate markets such as California or Hawaii, the prices are on the high end. The average price of a regular, non-VA, appraisal in the U.S. is $339, but it can be as high as $1,000 in cities and high demand counties.
You don’t have to guess. The VA has a list of the appraisal fees, separated by regions, so you can look them up for your region. In many cases, the seller will take responsibility for paying the VA appraisal fee, so consider that as part of your negotiation.
VA Appraisal Process
When using a VA loan, the VA sets up the appraisals. If you are wondering what you need to do to begin the VA appraisal process, the answer is: not much. Once you start the process of getting a VA loan, your lender and the Department of Veterans Affairs (VA) will work together to set up the appraisal. The VA itself has a nationwide list of professionals, and they will assign a VA-approved appraiser to the new home you are looking to buy. So you don’t have to go online, find one near you, contact them and set up the visit. That’s the VA’s job.
How Long Does the VA Appraisal Take?
For a VA appraisal, the timelines are between 7 and 21 business days to complete an appraisal. The more remote your property is, the longer the appraisal will take; therefore, appraisals for homes in Alaska and Wyoming and Guam take the longest. The list mentioned above will tell you how long appraisals will take in your area.
In terms of the average time it takes for non-VA conventional appraisals (2 days to 2 weeks), the VA appraisal does take a bit longer. Location is one factor in getting an appraiser on site, but it can also take longer in volatile or competitive real estate markets.
What Are VA Appraisers Looking For?
The short answer to that question is “livability.” That means they are looking for a home that is ready to be lived in as soon as you move in. They also use the term “move-in ready.” The appraisers are looking at the VA’s Minimum Property Requirements (or MPIs). They have published a full list of those requirements if you want to dig deeper into the process.
In addition to the MPIs, the VA also has a downloadable document that is the VA appraisal checklist which their appraisers use. Both are long documents, so here’s a summary of the elements of a property VA appraisers are looking for.
The bones of the house, including the roof, need to be solid and in good condition. The VA appraisal also includes a leaking basement or leaky windows, costs that add up if you must make repairs. The roof needs to have at least three years of life left. They will also look for any signs of dry rot, mold or fungus. They will report any paint peeling or chipping and missing siding.
Lead-based paint and asbestos top the list for hazards in an older home, but radon is getting increasing attention. Is the home in danger from natural disasters like floods, mudslides or sinkholes? If so, that will go on the appraiser’s report.
Access and Space
In this evaluation, the appraiser will judge whether the property has enough space for the number of people moving in (square footage, bedrooms, bathrooms) as well as making sure it has year-round access to local roads. They will also check the property lines to make sure the structures and driveway are not on a neighboring property.
This includes a lot. The appraiser will evaluate the property’s connection to water and the sewer system. In addition, they’ll evaluate gas, electricity, internet and everything else that makes the house livable. The plumbing, HVAC systems, electrical work, and water heater must all be up to code to meet the appraiser’s standards. They will also check for proper venting in the attic and crawl spaces.
This is a big deal and the VA loan appraisal guidelines are clear. It’s not universal and some states are exempted. But mostly the appraisers want to ensure wood-eating or wood-destroying pests don’t live in the house you want to buy. That means the VA loan appraisal requires you to get a pest inspection. Either the buyer or the seller can pay for a pest inspection, but this one is not optional.
Water must drain away from the foundation. Plus, any pooling of water on the property will be reported by the appraiser.
If the property has a swimming pool, the VA loan appraisal will include it in the value of the home. It will need to be evaluated for functionality, defects and any hazards.
What Happens If the Property Meets VA Loan Appraisal Requirements?
Sometimes, the VA loan appraisal report is going to come back and show the property does not meet the requirements. That can be for a couple of reasons:
- Finances Don’t Add Up – If the VA appraisal comes back saying the house and property are worth less, and you have agreed to pay for it, you’ve got trouble. Many of the VA benefits (such as no down payment, low interest rates and no private mortgage insurance) are based on the math that the property will be worth the home sales price.
- Too Many Repairs – The necessary repairs for the property are very extensive (and expensive).
If the appraisal comes back and it’s not going to be approved for the mortgage, consider these four possible solutions:
- Pay Difference in Cash – If the amounts don’t add up so that the appraised value equals or exceeds what you are going to pay for it, you can pay the difference in cash. For example, if the appraised value is $390K and the asking price is $400K, you might might make up the difference from savings. Unfortunately, a lot of home buyers, especially first time home buyers, don’t have that kind of money to access.
- Renegotiate with Seller – You can go back to the seller and renegotiate the price. That may be a tough row to hoe if the current real estate environment is very competitive, i.e. there’s a lot of demand for houses and low inventory.
- Make Repairs, Get 2nd Appraisal – If repairs are the issue, make the repairs and then get another appraisal. This is traditionally a case where the seller may agree to get certain repairs done. Or, they can cut the price so that the buyers can pay for the repairs. If problems arise during inspections or appraisals, the negotiations for repairs are often a bit easier than simply asking for the seller to reduce the price.
- Walk Away – Walk away from the property. No one likes that option, but sometimes that’s the best choice. Stepping away may hurt. But it won’t hurt as much as having a too expensive house or one that turns into a money pit.
VA Appraisals When Refinancing Your Home
Why are we talking about refinancing here? Because if you have been in your house for a while, and you are eligible for the VA Loan Program, they have two refinancing loans you should consider. They do, however, each have different VA appraisal requirements.
VA Interest Rate Reduction Refinance Loan (VA IRRRL) – This is a VA refinance loan you can use to reduce the interest you pay on your mortgage. That typically becomes an option if interest rates are falling. But if you can successfully refinance, it can reduce your monthly payment in the short term, AND your overall mortgage payments in the long term. This is also considered a streamlined refinance, so you do not need a VA appraisal to go forward with this.
VA Cash Out Refinance – This option lets you refinance your mortgage and turn the equity you’ve developed in the property into cash. You can use this cash to repair your home, renovate it, install energy efficient elements, pursue your education and take care of emergencies (for example, medical bills). This refinance requires more paperwork, is not streamlined, and must go through a VA appraisal.
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