VA Loans Take A Bit More Work, But Not More Time
VA home loans have many advantages for veterans and service members, including up to 100 percent financing, low loan rates and closing costs, and no private mortgage insurance.
There's a myth that VA loans take longer than conventional and other loans to close, but it's just that, a myth, says Jason Skinrood, a loan officer for Supreme Lending in Orem, UT, who specializes in VA loans.
However, there are some tight timelines for VA loans, and home appraisals must be done by VA-approved appraisers who do much more than a regular appraiser would. The VA also requires pest inspections - something a lender doesn't regularly do - and in some areas it requires well and septic inspections.
How a VA appraisal differs
Like any other appraiser, the VA appraiser is looking at a home's condition and value. But while someone without a VA loan would hire an inspector to look at health and safety issues of a home that their lender isn't concerned with, a VA appraiser focuses on such issues.
"They want to make sure the property is in good, working order," Skinrood says.
The VA has what it calls Minimum Property Requirements, or MPRs. A lot of what the appraiser looks for is cosmetic, Skinrood says, such as exterior paint that's not peeling, railing repair, and that the mechanical systems are safe and in good condition.
But some are small, he says, such as one home he worked with that had an electrical outlet without a plate over it, and the appraiser required that it be replaced. The 50 cent part was later bought and installed, requiring a $100 fee for the appraiser to come out to the house again, he says.
And the VA appraiser will inspect parts of a home that a home inspector normally would. These include checking the roof for leaks, attics and crawl spaces have natural ventilation, electrical and plumbing systems work well, no lead-based paint, and that there isn't any dry rot or pests such as termites on the property.
A VA appraisal sounds a lot like a professional home inspection, but it isn't, and buyers can still get a home inspection on their own, though it isn't mandatory.
There is some work that the VA requires that its appraisers can't do. If a home isn't on a city water line, Skinrood says, then an outside inspector will need to be hired to inspect the well and septic tank. It's a VA requirement that most lenders don't have, and can require a little more time, he says, and can be done by non-VA approved inspectors.
Why the extra work?
The VA wants homes that it backs mortgages for to be move-in ready in part because unexpected home repairs can put a military buyer's finances at risk and make mortgage payments more difficult.
VA loans are 0.25 to 0.50 percent lower than conventional loan rates because the VA is guaranteeing a portion of the loan amount, and the VA wants its borrowers to have a good home that they'll stay in, Skinrood says.
Mortgages for well maintained homes are less likely to be defaulted on, says Grant Moon, CEO of VALoanCaptain in New York City. The appraiser and the VA are looking out for the best interest of veterans, Moon says.
"I don't think it's overly burdensome on the buying and selling process whatsoever," he says.
If major repairs aren't needed, then an appraisal will likely be done on time. A lack of VA-approved appraisers in a borrower's location, however, can lead to longer appraisals and a loan being held up.
While there aren't reports of a national shortage of VA appraisers, veterans in rural areas could see a delay of a week or two, and up to three to four weeks if they live in a rural area where there's a high volume of VA home loans, says Van Tran, a vice president at Federal Savings Bank.
"Sometimes loans get held up when the VA appraiser goes out there and there needs to be repairs done on the property," Tran says. "The VA will not approve a loan that is 'subject to' repairs, and it needs to be 'as is.'"
The borrower must find a repairman to get the work done, then the appraiser must go back out to take photos and sign off on everything and revise the appraisal to "as is," he says.
One way to ensure a VA loan is approved in a timely manner is to work with a lender who specializes in VA loans. Elysia Stobbe, branch manager at VanDyk Mortgage in Jacksonville, Fla., says the VA has worked hard adding appraisers who adhere to VA turn times. "If the appraiser doesn't adhere to the VA turn times, the VA doesn't keep them," Stobbe says.
If there are problems, they're at the lender level, she says.