If you’re in the market for a home, you may have heard of a VA Loan, VA appraisal, or even a VA Loan Inspection. A VA loan is a special style of loan for veterans, and was initially created by the Department of Veteran Affairs, hence the name VA Loans. This helpful overview of a VA Loan will go over the differences between this and a regular loan and break down the various inspections you may need to perform on the home. While a home inspection isn’t required, it is highly recommended. A VA appraisal is required; while quite similar, they’re not the same. Also, many states require a mandatory pest inspection for VA loans, which we list below. The goal of a VA loan is to get veterans into homes that will not fall apart within a couple of years of buying them, with relatively low loan requirements. Of course, you won’t qualify for a VA loan if you’re not a veteran.
How does a VA loan differ from a traditional loan?
A VA Loan is specifically created for veterans, service members, and potentially select military spouses. These loans are designed to help veterans, who often struggle to get into the home market after service. One key difference between a typical loan and a VA loan is the VA loan requires $0 down. There’s also no private mortgage insurance (PMI) required. In general, interest rates are usually lower as well, and the qualifications are generally lowered. With the stipulation that you must be a veteran, as the name implies. The government set up this program to solve veteran homelessness and struggles, specifically in recessions. These men and women fight for the country — they should be able to buy a home upon returning. While this is a federally run initiative, the government still takes a hands-off approach. This means the loans are done through private institutions like banks and mortgage lenders.
Is a home inspection required for a VA loan?
It may come as a surprise, but a home inspection is not required for a VA loan. It is always highly recommended. This is because a home inspection is a detailed look at the home in its entirety and can outline some serious concerns hidden within. While it may seem tempting to save a few bucks, that decision could cost you considerably in the long run.
A home inspection isn’t to be confused with a VA appraisal, which we’ll discuss below. A home inspector ensures the house is in good condition, while an appraisal is focused on value over potential repairs. The difference is all in the details. You can also expect to get a pest inspection.
VA pest inspections
The southern US is prone to termites, which can cause severe damage to the wood and structure of a home. As a result, thirty states require a pest inspection to accompany a VA loan (though who pays for it differs from one state to the next). Check out this list to see if you’re in a state requiring a pest inspection.
- North Carolina
- New Jersey
- New Mexico
- Rhode Island
- South Carolina
- West Virginia
- Washington DC
VA home inspection VS. VA appraisal requirements
We explained that VA home inspections aren’t mandatory, but VA appraisals are. What’s the difference? An appraisal is an assessment of the property’s value and condition. This is not to be confused with an inspection of the home’s physical condition by a home inspector.
The point of the appraisal is to ensure the home is being sold at fair market value. Homes must also meet Minimum Property Requirements to be approved for financing, and an appraisal will confirm this. If the appraisal comes in and the property matches or exceeds the purchase price, you’ve experienced the best possible outcome. If not, you’ll have to discuss with your lender what the options are.
VA Appraisal Problems
A low appraisal can be a serious issue. Your VA loan cannot exceed the appraised value. If the buyer is looking for $300,000 for a home, but it’s valued at only $200,000, your loan will not cover the difference. In this instance, you can ask for a Reconsideration of Value. This will ask an appraiser to examine the house against other similar properties that weren’t considered in the appraisal before. Should that fail, you can ask the seller to lower the price. You never know — they might. Aside from that, you’ll have to shell out the cash or choose to walk away from the deal.
If the home appraisal is higher than what the seller is asking, no problem. Your lender will issue what the seller asks for — this is a good deal for you.
Some appraisals will require repairs to meet the MRPs (see below). You’ll have to deal with them to secure the loan if this happens. You can ask the seller to do them; if that fails, you can see if your lender will allow you to do them. Some lenders will — some won’t. If those fail, you will have to walk away from the deal.
Minimum property requirements for VA loans
Minimum Property Requirements are analyzed in a VA loan appraisal, and if a property doesn’t meet these requirements, the loan will not be issued. Here are some of the top MRPs needed for a VA Loan.
- Adequate Living Space: a home needs enough space to sleep, cook, and live within.
- Heating: The heating within the home must be able to retain a temperature of 50 degrees Fahrenheit. Depending on the heating situation, there may be some paperwork involved. Homes with wood-burning stoves must also have a conventional heating system.
- Electrical & Plumbing: These systems should be in proper working order, but that’s not all. They also need to appear to have some life left in them. If they work but could break down any minute due to age, then they won’t qualify.
- Roofing: The roof should not be missing shingles or contain gaping holes. Like the wires and the pipes, it should have a few good years before replacing.
- Water: The water supply to a home should be safe. The sewage needs to be effective and safe as well. Private wells need to meet water quality standards. The home needs a water heater.
- Crawl Spaces: these should be free of leaks, pooling water, or dampness. These issues can lead to both termites, and foundational issues, which can become costly if not dealt with. The crawl space, and basements, should be dry and clear of debris.
- Hazards: No asbestos, nuclear waste, or radon should exist within the home.
- Property Access: the home needs to be accessed via the street or have a special agreement for a private roadway.
- Termites: This goes hand-in-hand with the pest inspection, but a home should be termite-free.
- Lead Paint: If a home was built before 1978 and flakes, it’s assumed that lead paint was used. This would need to be scraped off and repainted.
- Construction: the construction within the home needs to be quality workmanship. You can resolve minor issues before closing, but significant construction defects will be a problem obtaining a VA loan.
A VA loan from the Veterans Affairs Department is designed to help veterans obtain housing as a thank you for their service. While these loans have some significant benefits, the point is to ensure the recipients can afford their homes after they buy them. As a result, certain aspects, such as a pest inspection, are mandatory to ensure the home doesn’t require crucial, surprise repairs or renovations immediately after purchasing. This provides some security to both the buyer and the lender, who want their investment to improve over time. This keeps the integrity and spirit of the VA loan intact and provides peace of mind when buying a home.