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How the VA Appraisal Process Works

Tuesday, August 14, 2012 - Article by: VAMORTGAGE411 - Integrity Mortgage Group - Message

When financing a home with a VA home loan, an appraisal is necessary in order to justify the loan amount. A VA loan amount cannot exceed the appraised property value.

There are a lot of people who are certified to appraise real estate. However, not all of them are VA approved. Only a VA-approved appraiser can appraise the value of a property being financed with a VA loan.

Although anyone can request an appraisal (buyer, seller, realtor or lender), a VA loan specialist working on the loan usually orders the appraisal early in the loan process to ensure ample time to address any problems that the appraisal may reveal. An online system appropriately called The Appraisal System (TAS) is a portal through the U.S. Department of Veterans Affairs website. Through the TAS portal, an appraisal request is made and dispatched to a VA-approved appraiser.

Because the assignment of appraisers to properties is handled by the VA, it is not possible for anyone to pick a "favorite" appraiser for any particular property. This helps prevent conflicts of interest and/or improper influence in valuations.

The cost for a VA-approved appraisal will vary from state to state. Typically, a VA-approved appraisal ranges between $300 and $400. In some cases, lenders require this fee to be paid up front. Otherwise, it will usually be paid at closing or be rolled into the loan.

VA loan appraisers must go through rigorous training designed to help them make fair and accurate appraisals on properties being considered for a VA Home Loan Guaranty.

It is important for borrowers to understand that a VA-approved appraiser does not perform inspections. And, a VA-approved appraisal is not a guarantee that a property is free of code violations or defects. Homebuyers should carefully inspect properties themselves or hire a reputable inspection company before closing in order to have ample time to resolve any issues that could prevent closing.

Even though VA-approved appraisers are not inspectors, they are trained to spot significant structural and health issues that could prevent closing. Problems such as broken steps, missing rails, unstable decks and other health and safety hazards may require repair before closing. All homes financed with VA loans must be considered livable.

Certain health and/or safety problems, if discovered during the appraisal process, may require fixing prior to closing date. However, there have been cases when the lender has approved creation of an escrow account for repairs after closing that could not be completed prior due to weather or other extenuating circumstances.

On new purchase loans, the appraised value of the home must meet or exceed the amount borrowed in order for a VA loan to be made. If the borrower is seeking 100% financing without a down payment, and should an appraisal come in lower than the purchase price, then the borrower may request an additional appraisal. Or the buyer could seek to renegotiate a lower purchase price with the seller by explaining that the appraisal value did not meet the original selling price and a loan is not possible until the two values match. Depending on the seller's circumstances, he or she may agree to lower a price.

If Refinancing a VA Loan. An appraisal is required for VA cash out refinance loans; however, there may be no appraisal necessary for VA streamline refinance loans depending on the lender. Some investors require an external appraisal within 6 months prior to a VA streamline refinance. In FEMA declared areas, however, there may be a full appraisal required for VA streamlines loans.

After all is said and done, a VA loan that requires an appraisal can only be made when the VA appraisal indicates that the property is adequate collateral for the loan. For answers to all VA appraisal questions contact a reputable lender.

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