In 2023, 400,692 VA loans were issued, totaling over $144 billion. VA loans offer veterans and active-duty service members a path to homeownership. It offers benefits like no down payment and competitive interest rates.
Furthermore, mortgage rates will likely fall below 7% in the coming months. Now might be an ideal time to explore your VA loan options. During a VA loan inspection, a home inspector identifies potential structural issues in the property to ensure it meets safety standards.
This makes it the right time to apply for a VA loan. Start here!
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What Is a VA Loan Inspection and VA Home Appraisal?
A VA loan inspection evaluates the property’s condition, examining plumbing, electrical systems, HVAC units, and the structure. A home inspection for VA loans is optional but gives buyers crucial insights into potential issues.
On the other hand, a VA appraisal is mandatory for all VA loans. Its primary purpose is to determine the Fair Market Value of the property. Its secondary purpose is to ensure compliance with VA’s Minimum Property Requirements (MPRs).
VA Appraisal vs. Home Inspection
Here are the differences between VA appraisals and VA loan inspections:
| VA Appraisal | VA Home Inspection | |
| Purpose | It determines the fair market value of the property. It also ensures it aligns with the loan amount requested. | VA home inspection evaluates the condition of the property, identifying potential structural and system issues. |
| Requirement | All VA loans must ensure the property meets VA standards. | It is optional but highly recommended to uncover issues about the property. |
| Process | A VA-certified appraiser assesses the property’s value. | Any home inspector can examine the property’s condition and identify problems. |
| Outcome | Determines whether the house meets VA’s Minimum Property Requirements. | Provides a detailed report on the house’s condition. |
VA Minimum Property Requirements
To qualify for a VA loan the house must meet Minimum Property Requirements. It ensures the home is safe and clean. Here are the key conditions:
- Space Requirements: The property must provide adequate living space per VA standards.
- Access and Encroachments: There should be clear access to the property with no encroachments on the boundaries.
- Hazards: The home should be free from hazards that could pose health or safety risks, like mold, radon gas, etc.
- Utilities: Water supply, sanitary facilities, gas, electricity, and sewage disposal must be in good working order and comply with local codes.
- Home Structure: The structural components of a home, such as the foundation, roof, walls, floors, ceilings, beams, and joists, must be in good condition.
- Drainage: There should be good drainage systems to prevent water damage.
- Pools: In case you have a swimming pool, it must comply with safety standards.
- Proximity to Airports: The property should comply with noise and safety regulations if it is near an airport.
What if Your Property Fails the VA Loan Inspection and Appraisal?
Here’s what you can do if your property doesn’t meet the VA loan inspection and appraisal requirements:
If the Home Doesn’t Meet Minimum Property Requirements:
In this scenario you request the seller to undertake repairs to align the home with VA standards, ensuring safety and sanitation.
Another option is to pursue an MPR waiver, requiring approval from the VA and your mortgage lender. However, the waiver must not compromise the property’s safety or sanitation. It should also comply with VA regulations.
If the Appraised Value Is Lower Than the Agreed Purchase Price:
In this scenario, you can negotiate with the seller to lower the sales price to match the appraised value, ensuring you pay a fair market value.
If the seller refuses to adjust the price, you may cover the difference in cash. This allows the transaction to proceed as agreed. However, evaluating whether investing more than the appraised value is a good investment for you.
Bottom Line
Understanding VA appraisal and VA loan inspection requirements is important for veterans and active-duty service members looking to buy a home. VA appraisals are mandatory to ensure properties meet VA standards.
If a property fails to meet VA loan inspection and appraisal requirements, you can negotiate repairs with the seller or seek an MPR waiver. In cases where the appraised value is lower than the purchase price, you can renegotiate the price or cover the difference in cash.
However, a home inspection report can help you determine whether to proceed with the deal or reconsider. If you opt not to proceed, you can continue your search for a new home without major defects.
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Frequently Asked Questions
What are the requirements for a VA home loan?
To qualify for a VA home loan, you must be a veteran, active-duty service member, or an eligible spouse. You must also obtain a Certificate of Eligibility (COE) and the property must meet the VA’s MPR to qualify for the loan.
Are VA loan inspections strict?
VA loan inspections are optional but thorough. They ensure the property is in good condition. However, they are not as strict as VA appraisals. Inspections do not directly impact loan approval as appraisals do. But they help buyers understand the property's condition before you purchase it.
What happens during a VA inspection?
During a VA inspection, a home inspector thoroughly evaluates the property's plumbing, electrical systems, HVAC, and overall structure. This assessment aims to uncover any potential issues, ensuring the property meets safety standards.
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