The VA loan has flexible guidelines, except when it comes to the appraisal. The VA has specific Minimum Property Requirements a home must meet in order to obtain VA financing for it. Unfortunately, there are times that an appraiser can’t approve a home for VA financing because of its condition.
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While this might be devastating news to you as the homebuyer, the rules are there to prevent you from buying a home that isn’t safe, sound, or sanitary. Luckily, sometimes the repairs are simple enough that you can manage the issues and still close on your VA loan.
Keep reading to learn how to make that happen.
Understand the Depth of the Problems
The first step is to figure out what’s wrong with the home. You can find out from your loan officer or the appraiser himself. The appraiser must provide the lender with a report of his findings. You have the right to receive a copy of the report so that you can figure out the next step.
Take note of each repair the appraiser reported that is necessary. Figure out if the repairs are major or minor. Typically, the seller won’t mind handling minor repairs, especially if they are a DIY repair. Major repairs may be another story, though.
Negotiate the Repairs
Once you know what is necessary for the appraiser to ‘pass’ the home, you should talk to your real estate agent and/or the seller’s agent. If you are operating on your own, you can talk to the seller directly. Make sure you keep the conversation matter of fact, and include as many details as you have from the appraiser.
Your first step should be to ask the seller to make the repairs. Make sure you cover every repair. The appraiser will need to come back out and inspect the property again, so you can’t cover anything up. You can even let the seller see the appraisal report so that he has a full understanding of the necessary repairs.
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At this point, you’ll typically have three options:
- Ask the seller to complete all of the repairs. The seller can make the appointments and oversee the work. The seller should provide your lender with documentation of the completed repairs, such as detailed invoices, or receipts from the materials bought if the seller did the repairs himself.
- You may be able to pay for the repairs. We generally don’t recommend this option because you’d be paying for repairs on a home that you don’t own, but it’s possible in some cases. Talk to your loan officer to see if you can pay for the repairs. If you can, make sure you keep plenty of documentation on the costs of the repairs and proof of their completion for the lender/appraiser.
- Walk away from the home and look for another. This isn’t your ideal situation, but if the seller won’t pay for the repairs, you may not have a choice. Even if you opted for another type of financing, the home still needs to pass an appraisal. If the issues are big enough, you probably won’t find financing.
The Appraiser Must Inspect it Again
If you choose either the first or second option from above, the appraiser must come out to the property again. This time he is only looking at the areas that he noted needed repairs. This is where the detailed documentation will come in handy. If the appraiser has any questions about the repairs, how they were done, or any other details, you can provide the necessary paperwork.
If the home doesn’t pass the appraisal this time, it’s safe to say you can’t get VA financing for it. While it may be devastating news to you, consider it a way of protecting you from investing in a home that could potentially be a money pit in the future.
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