When you’re buying a home with a mortgage backed by the U.S. Department of Veterans Affairs (VA), there are some specific guidelines and requirements you need to follow. In addition to certain closing costs and non-allowable fees, a VA loan requires a VA appraisal, which is different from a home inspection.
Learn more about the difference between the two, what a VA appraisal entails and what to do if the appraisal doesn’t go according to plan.
About the VA Appraisal
The VA has a list of minimum property requirements, or MPRs, that a property must meet to be approved for a VA loan. This ensures that the homeowner has a safe, secure and clean place to live. Although there may be some overlap, a VA appraisal is not the same as a home inspection.
A VA appraisal assesses the home’s fair market value and looks at the surface elements of a home to make sure it passes the MPRs. In contrast, a home inspection takes a deeper dive into the home to find anything wrong or that could go wrong in the future.
The List of MPRs
The following is a complete list of minimum property requirements as stated by the VA. The home you want to buy must generally pass all these requirements. While there are some exceptions depending on your situation, it’s important to understand the appraisal process and its details in its entirety.
Marketable Real Estate: The property must be a readily marketable real estate entity, and there is no limit on the property’s acreage.
Space Requirements: The property must have enough space for living, sleeping, cooking, dining and any sanitary facilities.
Access: The property must have safe pedestrian or vehicular access from a street with an all-weather surface.
Encroachments: Any encroachments to the property or neighboring property must be reported and resolved.
Drainage and Topography: The property must have proper drainage away from the dwelling and must prevent any flooding of water.
Geological or Soil Instability, Subsidence and Sinkholes: Any unsuitable soil conditions must be reported, and the appraiser must determine any hazards or imminent dangers to the land the property is on.
Special Flood Hazard Area: Any property located on a Federal Emergency Management Agency (FEMA) Special Flood Hazard Area (SFHA) must have a flood insurance policy.
Coastal Barrier Resources System and Lava Flow Hazard Zones: Many properties located in these zones are not eligible for an appraisal. Double check with your appraiser.
Non-Residential Use: A property used for both residential and business use may be eligible for a loan, depending on a handful of considerations.
Zoning: The property must comply with current zoning ordinances.
Local Housing/Planning Authority Code Enforcement: The appraiser must report any specific local housing/planning authority code enforcements.
Utilities: The property must have available electricity for necessary equipment.
Water Supply and Sanitary Facilities: The property must have water for drinking, bathing, showering and sanity facilities.
Individual Water Supply: The property’s water supply must meet the guidelines of the health authority having jurisdiction or the Environmental Protection Agency (EPA).
Individual Sewage Disposal: The property’s sewage system must dispose of all unsanitary water safely.
Shared Wells: If the property has a shared well, it must have a continuous supply of water to all properties and be properly maintained.
Community Water Supply/Sewage Disposal Requirements: The appraiser must report if the property is on a community water supply/sewage system.
Hazards and Defective Conditions: The property must not have any hazards or defects that affect the homeowner or dwelling, or they must be remedied.
Mechanical Systems: Any of the properties mechanical systems must be safe to operate and protected from the elements.
Heating: The property must have heating installed.
Alternative Energy Equipment: This equipment must be analyzed for market acceptance.
Roof Covering: The property’s roof must prevent moisture and provide utility and durability.
Attics, Crawl Spaces and Basements: The property’s attics, crawl spaces and basements must be viewed by the appraiser, and they must report if anything must be repaired or might affect the health of the homeowner.
Swimming Pools: If the property has a swimming pool, the appraiser must report any structural issues that must be repaired.
Burglar Bars: If the property has burglar bars, one window in the room with the burglar bars must have a quick-release mechanism.
Lead-Based Paint: If the property was built in 1978 or later, the appraiser must report any paint-related defects and must be remedied.
Wood Destroying Insects/Fungus/Dry Rot: These defects must be reported by the appraiser and must be remedied.
Radon Gas: The property must be tested for radon gas.
Potential Environmental Problem: The appraiser must report any potential environmental problems, such as oil and gas wells, and they must be remedied.
Stationary Storage Tanks: The appraiser must report any stationary storage tanks with flammable or explosive material.
Mineral, Oil and Gas Reservations or Leases: The appraiser must report any potential damage made by mineral, oil and gas reservations.
High Voltage Electric Transmission Lines and High Pressure Gas and Liquid Petroleum Pipelines: The property must not be located within high voltage electric transmission lines or high-pressure gas or liquid petroleum pipelines.
Properties Near Airports: If the property is near an airport, the appraiser must consider the airport noise’s effect on the property’s value.
What to Do if the Property Fails the VA Appraisal
If the home you want to buy doesn’t meet the MPRs set forth by the VA, it fails the appraisal. What then? You may have a couple of options to help get the property to meet minimum requirements.
Negotiate with the Seller
There’s a chance you could speak with the current owner to make any repairs and get it appraised again. Or you could ask them to lower the price to meet the fair market value.
Pay the Difference in Cash
If the seller doesn’t want to lower the price, you may be able to just pay the difference between the appraisal value and price in cash. However, you may need to adjust your budget for other things as you’ll be paying more than the property is worth.
Ask the VA for an MPR Waiver
You may be able to request a waiver from the VA to waive an MPR, but this cannot result in any safety issues with the property.
VA Loan Knowledge is Power
One of the keys to a fast and efficient loan process is understanding what to expect. And knowing all aspects of a VA loan appraisal could significantly help minimize confusion and roadblocks during your journey to buying a home.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.
