The VA Loan Appraisal Process

Before your home can be approved for VA loan financing, a VA appraisal must be completed on the property.

A VA appraisal involves a thorough inspection of the home and property to determine the current market value of the home. This appraisal is especially geared towards reporting any defects involving safety or security of the home.

So, how does this fit into the VA loan process?

Simply put, even though the VA’s primary focus in assist veterans in financing a home, the VA must also take precautions to protect the investments of both the borrower and the VA itself with a good appraisal.

Let’s say that a veteran or member of the military found a house that he wanted to purchase for $100,000. The house seems to be exactly what he’s looking for; single story, pool in the backyard, freshly painted, and located on 4 acres of land out in the countryside.

He decides that he wants to use his use his hard-earned military benefits to get a zero money down VA loan. In other words, if approved, he’ll receive a fully financed $100,000 VA loan.

As part of the standard VA loan approval process, a VA-appointed appraiser goes to the property to do an appraisal of the actual worth. Unfortunately, the appraiser discovers that the house needs a new roof, there are cracks in the pool cement, and there are severe irrigation issues throughout the property that need to be fixed, among other miscellaneous flaws.

Tallied up, the appraiser determines the value of the home and property to be $75,000 instead of $100,000.

Because of the large difference between what the seller is asking for and the actual value of the property, the VA ultimately turns down the loan.

Of course, this is a somewhat extreme example, but you get the idea. The VA needs to verify that the actual value of the home and property is close to what a potential borrower wants to pay for it.  Neither a mortgage bank to the the VA want to insure homes that are worth less than the loan then you applied.

Here is a list of things to consider when shopping for a new home:

  • The appraiser needs to inspect both the inside and the outside of the house. If the house in question is being constructed, the appraiser still needs to analyze the property and construction site.
  • The official appraisal report will contain a list of “observable repairs that need to be completed.”
  • This report will also contain a list of “customer preference items to be installed.”
  • A few small issues with the property won’t immediately disqualify it, but a lot of small issues or a few big issues may.
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