When you apply for any type of mortgage to buy a home, the lender will usually require an appraisal to estimate the home's value. The same goes for a VA loan, except the lender will hire a VA-approved appraiser. Here's what a VA appraisal entails and how much it will cost.
What is a VA loan appraisal?
A VA appraisal is required when using a VA loan to buy a home. Besides estimating its market value, a VA-approved appraiser thoroughly checks the home to make sure it meets minimum property requirements set by the U.S. Department of Veterans Affairs.
A VA appraisal is also required to get a VA cash-out refinance but may not be required for a VA streamline refinance.
» MORE: How to refinance a VA loan
Nerdy tip: Normally, an appraiser views the property inside and out. But due to the coronavirus pandemic, the VA is not requiring appraisers to step inside homes for many purchase and refinance mortgages until further notice. Instead, VA appraisers can rely on data, photos, exterior views and phone interviews with the real estate agent, owner or loan applicant. Learn more about buying and selling a home during COVID-19.
VA appraisal fees
The lender hires the appraiser, but you pay the VA appraisal fee as part of the mortgage closing costs, unless the seller agrees to pay it.
The VA limits how much appraisers can charge. The appraisal fee limit varies by state and sometimes county. Nationwide, maximum VA appraisal fees range from $425 to $875 for single-family homes, condos and manufactured homes. Appraisers can ask for permission to charge additional fees for mileage and the extra time required to evaluate complex properties.
» MORE: What are VA loan closing costs?
VA appraisal checklist
The VA’s minimum property requirements ensure that homes financed by VA loans are safe, structurally sound and sanitary.
VA minimum property requirements
The VA’s appraisal guidelines are lengthy and detailed. Here are some of the highlights:
There must be enough space for living, sleeping, cooking and dining, and adequate bathrooms.
The property must be safely accessible via a public or private street with an all-weather surface.
Water must drain away from the house.
The home must have electricity for lighting, and any visibly damaged or exposed electrical wires must be repaired.
There must be a continuous, safe water supply, hot water, sanitary facilities and safe sewage disposal.
Mechanical systems must be safe to operate and protected.
The roof must be in good condition.
The crawl space must be accessible and properly vented.
Basements must be dry and not have any obvious structural problems.
Exterior paint should provide thorough coverage to protect the home from the elements. On homes built before 1978, any loose, cracked or peeling paint inside or outside must be repaired due to the possibility of lead contamination.
Any defective conditions that make the property unsafe or threaten the structure or sanitation must be corrected. Examples are defective construction, leaks, decay, excessive dampness and termites.
VA appraisal timeline
The VA also sets standards for how long it takes for appraisers to respond and complete the work. The timeliness requirements for VA appraisals vary by region and are based on customary timelines for conventional home appraisals.
The VA appraiser must respond to schedule an appointment within two business days of receiving an assignment. Appraisers then have anywhere from five to 21 business days to complete the report, depending on the property location. Exceptions can be made for extenuating circumstances.
VA appraisal vs. home inspection
A VA appraisal is not a home inspection. An inspection is a detailed assessment of a home's condition. It's a good idea to get a home inspection after a seller has accepted your offer but before the purchase is complete.
“A VA appraiser will note when 'readily apparent' repairs are needed to meet minimum property requirements.”
A VA appraiser will note when "readily apparent" repairs are needed to meet minimum property requirements, then prepare an appraisal that is subject to those items getting fixed before closing. But the appraiser won't do the kinds of detailed checks of mechanical systems and appliances that inspectors do.
What happens if the VA appraisal is low?
A low appraisal can trip up the homebuying process because the VA loan amount can't exceed the home's market value.
If the estimated market value will likely be less than the sales price, the appraiser must notify the lender before finishing the report. The lender or others involved in the transaction then have two business days to submit additional sales data for comparable homes in the area. Appraisers use sales of comparable homes, known as "comps," to help establish market value.
The appraiser will consider the data and may make adjustments if the information has any bearing on the home's value.
If you think the value is low after the appraisal is completed, you can usually ask the VA to reconsider the value. Ask your lender how to make this request in writing. The VA staff will review the appraisal report, along with any additional market data submitted, and determine if the appraised value should be increased.
Usually you can ask the VA to reconsider the value for a cash-out refinance. But the VA has suspended that process until further notice due to the coronavirus.