VA Loans and VA Related Repairs
Have you been discouraged from a VA loan because of potential repairs? EEK!! This may be a red flag – you should never be discouraged from using the benefit you earned with your service! The vast majority of the VA loans we close do NOT require repairs! But let’s discuss what happens if there are health or safety repairs required.
VA Loan Basics
The VA loan is a fantastic option for service men and women who qualify. It is available to veterans, active-duty service members and eligible spouses. The program is designed to help those who serve or have served in the military buy homes. There are tons of benefits, including no down payment, no PMI, interest rates that are typically lower than conventional financing, and some more lenient credit requirements, all of which make home-buying more accessible and affordable.
Many Veterans still choose to do a VA loan even when they have 20% or more down payment. Why? Because the interest rate is typically LOWER than a regular Conventional loan! Not all lenders will tell you that, so it’s important to use an active VA lender, like Residential Mortgage Network!
VA loans, and other government loans such as Rural Development and FHA loans, have Minimum Property Requirements (MPRs) that are based on health and safety guidelines. Homes should meet these MPRs to be eligible. The VA loan requires an appraisal process to be done on the home by an approved appraiser. Please note: an appraisal is NOT a home inspection, but the appraiser will look to make sure the home meets the MPRs. An appraiser is at a home about 20 minutes while a home inspector is there over two hours. Most of the appraiser’s time is spent doing research for comparable sales when they get back to the office.
What makes us so knowledgeable about VA loans? We have been offering them since 1987 (when the company was founded) and we underwrite them in-house. If a buyer, Realtor, or appraiser has any program questions or MPR questions, they know they can call us and we will have answers since we know the program inside and out! Some lenders broker these loans out through another institution, which makes it hard to get a straight answer, or they are so large that their centralized underwriting desk may give an answer that will vary from underwriter to underwriter, making it less reliable. Our team researches together and shares answers so we are all on the same page with program or MPR questions.
There are a few things a VA loan borrower and their Realtor can look for while searching for a home:
- Chipped and peeling paint on an older home
- A roof in decent condition – typically at least 2 years of life remaining (appraiser does not complete a roof inspection OR go on the roof – they simply note if they see shingles curling and a qualified inspector makes the determination)
- Handrails should be installed on staircases or steps that are more than 18 inches tall
- The hot water heater must have a relief valve installed within 6 inches of the floor
- There should not be any exposed or loose electrical wires in the home
- The property should provide positive drainage away from the dwelling
Those aren’t too scary, are they?! And the best part about working with a lender like RMN is that we are happy to discuss any concerns up front, before you even make or accept an offer! If we don’t know the answer we will contact one of our trusted appraisers! Not all lenders are willing or able to do this – one more reason why working with a local, experienced VA lender is key to a smooth transaction!
What If the Home Doesn’t Meet the Requirements?
If repairs are required, they will be outlined in a report the appraiser provides after the appraisal is complete. The borrower is typically responsible for paying the necessary repairs as a condition for obtaining the loan. Weather permitting, the repairs are required to be done prior to closing. If an escrow is required, we need a bid for the repair item and 1.5 times the bid amount is held in an account until the work is complete.
Can The Borrower Negotiate This?
The borrower and the seller can enter into a negotiation process for the repairs as a part of the purchase agreement after the appraisal. In some cases, the seller may agree to pay for certain repairs or provide a credit to the buyer at closing to cover the cost of those repairs themselves.
Can a Seller Make Repairs Before the Purchase Agreement?
Occasionally a seller will know about issues in their home that will prevent it from meeting MPRs before an appraisal even happens, and could make those changes in order to make the home more appealing to eligible borrowers.
Overall, homes typically do NOT need any repairs to qualify for a VA loan, and you can use this as a helpful guide of what to look for to avoid repairs. The key is to have a clear understanding of the VA’s requirements and that can come from working with experienced lenders (like us) – we’ve been offering this program since 1987! We can guide you through it every step of the way!