For years, VA loans have been dogged by reputation as bureaucratic, time-sucking black holes.
But some major pillars of the VAâ€™s loan program have long been misunderstood or mischaracterized. Nowhere is that more true than the VA appraisal, a fair but stringent process that puts a premium on a veteranâ€™s health and safety.
A VA appraisal is more thorough than a typical appraisal and mandates immediate repairs that need to be made in order to meet the agencyâ€™s Minimum Property Requirements (MPRs). Homes must be what the agency considers â€śmove-in ready.â€ť
Having an agent who knows the VA MPRs can certainly spare veterans time, heartache and money. The earlier a veteran understands the limitations and requirements, the sooner he or she can make a decision about whether to move forward with the property or to continue the home search.
Understanding the MPRs has also become increasingly important since the economic collapse flushed the housing market with foreclosures.
Hereâ€™s a look at 10 of the big-time MPRs:
- Nonresidential Use – VA loans canâ€™t be used to purchase investment properties or businesses. But veterans can purchase a home that has business or nonresidential space so long as it doesnâ€™t exceed 25 percent of the total floor space.
- Mechanical Systems – All of the homeâ€™s mechanical systems (heating, cooling, etc.) have to be safe, in working order and likely to remain in that shape.
- Heating – The VA is concerned about heating beyond the Mechanical Systems category. There are rules and regulations governing properties that rely on wood-burning stoves and solar systems as primary heat sources. Homes with the former must have a traditional heating system in place to make sure pipes donâ€™t freeze. Solar heating systems also need a back-up heat source. There are some climates that allow the VA to waive requirements for mechanical heat systems.
- Roof Covering – The roof canâ€™t be defective, leaking or in bad shape.
- Crawl Space - If the home has a crawl space, the area has to be free of debris and vented properly. There must be enough space for workers to access ductwork and plumbing. Any problems with excessive moisture will have to be remediated.
- Property access – Typically, the most important element here is that veterans must be able to get to their living area without having to first pass through someone elseâ€™s. Streets are required to have some type of all-weather surface. If the access comes via a private road, the borrower has to produce a private road agreement that spells out the access rights and maintenance responsibilities. The agreement must also have the signature of every person living along that private road.
- Termites – Appraisers are required to look for insects that eat away at wood, along with fungus growth and dry rot. A separate pest inspection is required for VA funding if itâ€™s clear thereâ€™s a problem or if the home is located in a place likely to see an infestation. A termite problem has to be under control before a veteran can secure a VA loan. And veterans cannot pay the termite inspection fee on a VA purchase loan.
- Lead-based paint – VA appraisers are required to assume that paint problems (like chipping, cracking or peeling) at any property built before 1978 involve lead paint. Unless further tests can show acceptable lead levels, the surface has to either be repainted or reconstructed.
- Gas, Petroleum and High Voltage Electricity Lines – Utility and energy companies often hold easements on properties near these types of transmission lines. That easement essentially means the utility company can control the use of some private property in order to operate and maintain its facilities. The VA will not fund a loan for a home thatâ€™s located in an easement for any of these three types of transmission lines.
- Wells and Septic Systems – The VA prefers a connection to a community water system, and in fact requires it where available. When that isnâ€™t feasible, properties with well water have to meet either local or federal safe drinking water standards. But the array of home-based treatment systems available today means even veterans with contaminated well water may still be able to receive a VA-guaranteed loan. Thereâ€™s currently no inspection required of septic systems unless the appraisal documents a potential need.
Chris Birk is director of content and communications for Veterans United Home Loans, the nationâ€™s leading dedicated VA lender.