With mortgage rates low and home sales rising, the VA home loan is an important part of the U.S. housing landscape. For eligible military borrowers, the VA program provides a host of borrowing benefits.
The VA appraisal is one of them.
VA loans are mortgage loans guaranteed by the Department of Veterans Affairs, where "guarantee" means that the VA reimburses lenders against loss should a home go into short sale or foreclosure.
When it was initially launched in 1944 as part of the G.I. Bill of Rights, VA loans were meant to help returning servicepersons assimilate into "civilian life".
Since its inception, the VA has guaranteed more than 20 million loans.
The VA Home Loan Guaranty program helps to make homes affordable for eligible military borrowers by reducing downpayment requirements, softening qualification standards, and eliminating the need for monthly mortgage insurance, which helps to keep monthly payments low.
Furthermore, the VA makes refinancing simple.
Via its Interest Rate Reduction Refinance Loan (IRRRL), the VA backs the simplest and quickest streamline refinance available. With the "VA Streamline Refinance, there are no credit checks, no employment verifications and no debt-to-income ratios to satisfy.
All it takes to qualify for the IRRRL is a strong payment history and proof that there's a benefit with the refinance. This can include lowering your monthly mortgage payment, or switching from an ARM to a fixed rate loan.
Another VA loan benefit is its appraisal program. Different from the manner in which the FHA and both Fannie Mae and Freddie Mac conduct appraisals, the Department of Veterans Affairs uses its appraisal process to verify the home's value and to make sure that the home's condition is livable.
Here are a few quick facts about the VA loan appraisal program.
Appraisals for VA loans go deeper than appraisals for other popular loan types. Among the differences, there are several which stand out.
When a VA appraisal is commissioned by your lender, the job is assigned via the VA's central appraisal system. The VA's appraisal system assigns appraisers on a rotating, randomized basis. In this way, appraisers have little direct contact with lenders which helps to assure autonomy and independence.
In addition, appraisers with a heavy workload may be less likely to be assigned to your home which can help to improve appraisal completion times. Faster appraisal turnarounds can be correlated to faster closings.
The VA allows buyers to purchase homes with no money down and permits certain closing costs to be added to the buyer's loan size. Appraisal costs, however, are often excluded; appraisals must be paid with savings.
To protect home buyers, the Department of Veterans Affairs enforces a VA appraisal fee schedule so you can feel safe in knowing that your appraisal costs are fair and reasonable.
Note that the VA Streamline Refinance does not require an appraisal. There are no appraisal costs associated with a VA-to-VA loan refinance.
Another main difference between VA appraisals and the appraisals required for other loan types is the depth of work required. VA appraisers are instructed to inspect and comment on a home's safety rankings and the status of its "working parts".
For example, as part of the process, the VA appraiser will perform home inspection-like duties which include a review the home's mechanical systems; its foundation; its gutters and downspouts; and, its plumbing. The appraiser will also check for carbon monoxide detectors.
The VA appraisal can help to identify potential defects in a home, but it should not be used in lieu of an actual home inspection. Buyers should always commission a home inspection separately.
Appraisers make mistakes and the Department of Veterans Affairs knows it. This is why the VA employs a formal appraisal review process to which any home buyer or REALTOR® can post.
The VA calls it a Reconsideration of Value and it's most-commonly used when the appraised value of a home is less than its agreed-upon sale price. With other loan type, this scenario can "kill the deal". With the VA loan, it's just a starting point.
No evidence is needed to submit a Reconsideration of Value although providing comparable sales data and relevant market information for the home can be a help. Reviews are always fair and balanced.
For VA buyers, the appraisal process offers fairness and protection. It's another perk of the mortgage program used more than 20 million times since its inception.
If you're an eligible VA borrower, take a look at today's VA mortgage rates. Pricing is great and fees are often lower than for comparable fixed- and adjustable-rate mortgages. See how a VA loan fits your budget.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)