What Are VA Loan Appraisal And Inspection Requirements?

VA loans are designed to help eligible veterans, active-duty service members and surviving spouses achieve homeownership. When taking out a VA loan, you’ll likely come across the terms “VA home inspection” and “VA appraisal.” While the two assessments sound the same, they have some differences.

A VA appraisal is always required and shares some elements with a conventional home appraisal. VA home inspections, however, go far beyond VA appraisals and do much more to protect buyers.

Read on to learn more about how VA inspections differ from VA appraisals. Then, we’ll explore the appraisal requirements for a VA loan and how they can help you determine whether to proceed with a real estate transaction.

Does A VA Loan Require A Home Inspection?

Department of Veterans Affairs (VA) loans don’t require a home inspection. They are optional but often highly recommended by VA lenders. In this respect, VA loans are like Federal Housing Administration (FHA), conventional and most other types of home loans.

Unlike many other mortgage options, VA loans always require a home appraisal to determine the property’s value for lending purposes. The appraisal also helps ensure that the home meets the VA’s minimum property requirements (MPRs).

MPRs are put in place to protect veterans from purchasing unsound properties. Because VA home appraisals involve evaluating whether the home meets these requirements, some people may confuse the VA appraisal with an inspection.

VA Appraisal Vs. Home Inspection

A VA appraisal is designed to assess the home’s fair market value. Lenders use this number to determine a loan amount. They also use it to ensure the home has enough collateral in it should you default on the mortgage loan.

But the VA appraisal has other jobs, too.

The VA appraiser must make sure the home is safe, sound and sanitary for the home buyer. In other words, the home is ready to be lived in and is unlikely to cause the veteran any harm physically or financially. The appraiser must make sure the home meets the VA’s minimum property guidelines and that it’s in good enough condition that it won’t require substantial repairs. The VA appraiser provides their findings in an appraisal report.

However, there are still some limitations to a VA appraisal, and it shouldn’t be treated as a full home inspection. The appraisal looks at the “surface” elements of a home, but an inspector takes a deep dive into every nook and cranny of the house. The VA home inspector tries to find anything that is currently wrong or could go wrong with the property in the next few years.

VA Appraisals Vs. Conventional Appraisals

It’s a common myth that VA appraisals are “stricter” or “worse” than conventional appraisals. They have a lot of similarities and, quite honestly, aren’t much different. Let’s take a look at some of the similarities and differences between VA and conventional loan appraisals.

Similarities

The goal for both VA and conventional loan home appraisals is to find the home’s fair market value. The appraiser visits the house, takes measurements, surveys its condition and takes pictures.

The appraiser for both appraisal types also compares the subject property to three comparable properties that sold within the last 6 months and are located nearby. This is how the appraiser comes up with the fair market value.

Appraisers for VA loans and conventional loans also look for significant issues with the home and major value-enhancing upgrades. For example, a large hole in the roof would hurt the appraisal, while a larger kitchen with new appliances would improve the property, increasing its value.

The lender always orders the appraisal from a third party, but the buyer pays for it.

Differences

The primary difference between VA and conventional appraisals is that VA appraisals have minimum property requirements, or MPRs. While MPRs may sound daunting to buyers who worry the appraisal requirements could get in the way of their loan approval process, denials are relatively rare.

If a property doesn’t meet the MPRs, it can generally be a source of relief for the buyer. MPRs can prevent buyers from purchasing homes that are overvalued or that would require major structural repairs or renovations.

It’s common for sellers to feel worried about meeting the MPRs. But as long as they’ve taken care of the property, appraisers will likely pass the property. If the appraiser finds any issues, the seller could fix the issues so that the property passes the VA appraisal.

VA Minimum Property Requirements

The U.S. Department of Veterans Affairs establishes the MPRs. The purpose is to ensure the house is in good condition and meets the VA’s standards for property safety, soundness and sanitation.

Here are ten VA loan appraisal requirements and what you should know about them.

1. Space Requirements

All homes must have enough space for your family. This includes adequate living space, sleeping quarters, cooking and dining areas, and bathrooms. The home doesn’t have to be large – just big enough to fit your family’s needs according to the VA guidelines and local building codes.

2. Access And Encroachments

All properties must have year-round street access to the home, and any private roads must have a permanent easement and be managed by a homeowners association (HOA). The property must also not encroach on another property. This includes any part of the property, such as a garage, utility easement or any other building.

3. Hazards

The property must be free of any natural hazards, including flood zones, sinkholes and any type of environmental contamination. This includes radon gas, asbestos and lead-based paint. The MPRs consider any threat to physical health or safety a hazard, and anything that could affect the structural soundness of the property.

4. Water Supply, Sanitary Facilities And Sewage Disposal

The property must have year-round access to safe and potable water used for drinking, showering, bathing and any other sanitary uses. There must be a supply of hot water and sanitary facilities to use for all family members. The property must also effectively manage safe sewage disposal systems.

5. Gas, Electricity And Other Utilities

Every house must have adequate utilities, including electric, gas and properly working HVAC systems. All home systems must be in good working condition, including gas and electrical systems. The heating system must work well to heat the entire home during the colder months, and the A/C must work well to cool the home down during the warmer months.

6. Home Structure

The home must have well-managed structures, including a roof, crawl spaces, basements and attics free from pest damage, mold, mildew or other infestations.

The home’s roof must protect it from moisture and be free of the need for immediate maintenance. All attic, basement and crawl spaces should have easy access, be free from debris or hazards and have proper ventilation.

7. Pest Inspection, Dry Rot And Other Signs Of Deterioration

Appraisers must note any damage caused by termites, wood-destroying insects, pest infestation, dry rot or any other defects that cause structural issues with the home. The appraiser must look for issues that could make the home less stable and/or put the occupants in harm’s way.

8. Proper Drainage

The home must be able to drain away from the foundation, and there shouldn’t be any pooling of water on the site. If there are any noticeable issues with the property’s drainage, the appraiser must report them.

9. Pools

Pools are allowed for VA financing, but they must be in good working order. The appraiser must report any defects or hazards a pool poses, which could limit its ability to pass the MPRs. As long as the pool equipment is in good working condition and the pool itself doesn’t have any observable defects, it should pass the MPR for a VA loan.

10. Proximity To Airports

If a property is located near an airport, the VA appraiser must evaluate whether any airport noise or other concerns will affect the home’s livability, safety and fair market value.

If a veteran wants to purchase an existing or new construction property that’s located in a Clear Zone, which means it's within a certain distance from an airport runway, the veteran must acknowledge the potential effects of buying the house. The veteran buyer will likely have to sign some paperwork provided by the appraiser acknowledging the proximity to an airport runway.

Proposed construction properties in Clear Zones do not pass the MPRs and are not eligible for VA loans.

What To Do About Problems With The VA Appraisal

Sometimes VA home appraisals don’t work out, which can delay the loan process or cause you to lose your loan approval altogether. Here’s what to do if that happens.

The Home Doesn’t Meet Minimum Property Requirements

If the home doesn’t meet the MPRs, you have a few options. You can ask the seller to fix the issues so you can move on with your financing and close on the loan. You can also cancel the sale because the home isn’t safe, sound and sanitary as is required by the VA.

If the home doesn’t meet the MPRs, you also have the option to request an MPR waiver, which is a written request from the veteran home buyer to waive an MPR. This waiver needs to be approved by the VA and the mortgage lender. The waived MPR also can’t result in safety or sanitary issues with the home.

The Appraised Value Is Low

Sometimes the appraised value comes in lower than the price you agreed to pay. In this case, you have a few options. Since the VA loan amount can’t exceed the market value (because it would mean you’re paying more than the home is worth) you have these options:

Ask The Seller To Lower The Sales Price

Some sellers will lower the sales price to meet the fair market value. This ensures they don’t lose the sale and can still move forward with the real estate transaction. If the seller agrees to lower the cost, you can continue with the home purchase.

Pay The Difference

If the seller won’t lower the sales price and you still want to buy the home, you can pay the difference, called the appraisal gap, between the appraised value and the sales price in cash. This is in addition to any down payment you were planning to make, although a down payment is not required with VA loans. Keep in mind that you’ll be investing more into the home than it’s worth, which means you’ll have no equity in the home when you first buy it.

Walk Away From The Sale

You also have the option to cancel the sale since you can’t get financing for an amount higher than the appraised value. If you have an appraisal or financing contingency on your contract, you won’t lose your earnest money and won’t invest in a home for more than it’s worth.

VA Loan Appraisal And Inspection Requirement FAQs

Do you have further questions about the VA loan appraisal and inspection requirements? Let’s go over some frequently asked questions that may come up during the VA loan process.

What inspections are required for a VA loan?

While VA loans don’t require a home inspection, they always require a VA home appraisal. This special appraisal is not as in-depth as an inspection, but it will give you a good idea if the home is suitable for VA financing. Again, this just means the house is safe, sound and sanitary.

When is a home inspection required for VA loans?

Home inspections are never required for a VA home loan, but they are always highly recommended. The inspector will take a much closer look at the home and its functions. You’ll know exactly what you’re getting, what issues may come up soon and what you should fix right away.

When should I have my home inspection done for a VA loan?

It’s always a good idea for the borrower to order a home inspection as soon as you sign a sales contract. Get the inspection going so you can decide early on in the process if you no longer want to buy the home.

Is the VA appraisal fee required upfront?

Yes, it is. You should plan on spending $600 or more on the VA appraisal fee.

What is the timeline for the VA appraisal process?

The typical timeline is 10 days, but you should build in a buffer when anticipating a closing date. High demand for appraisers can sometimes slow down the appraisal process.

The Bottom Line

VA loan inspection requirements don’t exist, but home inspections are highly recommended. Even though the VA appraisal and its minimum property requirements are quite extensive, nothing compares to a full-blown inspection. Regardless of what type of loan you get, you’ll want to make sure the home is fully appraised and/or inspected so that you can make a strong offer and secure your new home.

Getting preapproved early in the home buying process will help you understand how much you can afford and save you time as you search for homes. Start your application and get approved with Rocket Mortgage^® today.