Veterans can buy a home with no money down -- a welcome feature for first-time buyers and those who are cash-strapped. The Department of Verans Affairs guarantees a portion of the loan, promising to repay the lender if the borrower fails to do so. To protect its investment, the VA lender makes sure homes meet the department's minimum property requirements by requiring appraisal inspections.
VA appraisals have two main components: the property valuation and inspection. The appraiser compares the home to properties that are similar in size and features -- located usually within a one-mile radius -- that have sold within the past few months. The appraiser must inspect the home inside and out to determine its condition, its main components and any defects. VA appraisers use their own judgment while following the VA's minimum property requirements to arrive at a value.
Health and Safety
Homes must meet certain health and safety standards to pass the appraisal. VA homes have specified areas for sleeping, cooking, dining, living and sanitation. Mechanical systems, such as affixed appliances, plumbing and electricity, must be safe to use, free of destructive elements, have sufficient capacity and quality for the property size and not be unreasonably outdated or obsolete. Homes must also have a potable water supply and safe sewage disposal.
The VA guarantees loans on homes that are structurally sound, which lowers the chance of the veteran having to leave the home or stop paying for it. The appraiser checks for signs of a defective foundation, such as uneven floors, cracked supporting walls and other signs of foundation settlement. The appraiser also checks for signs of a leaky roof, excessive moisture and dampness throughout the home, termites and decaying components. Signs of lead-based paint, such as cracking and peeling surfaces in pre-1978 homes, defective construction and poor workmanship also threaten a home's structural integrity and keep a home from gaining VA approval.
The VA appraiser provides an unbiased opinion of value and condition. Unfavorable appraisal results, such as a low value or substantial repair requirements, can jeopardize a loan. VA appraisals are often considered more conservative and stringent than conventional loan appraisals. Appraisal guidelines allow a borrower to request a reconsideration of value if the appraiser fails to use qualified comparable homes or makes a mistake in the report. Ultimately, the VA lender decides whether to accept an appraised value and repair recommendations.
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