VA Home Loan
VA Appraisal Process
In the Jacksonville, NC market the majority of home buyers that I work with will be using their VA entitlement to buy their new home. There are a couple things you need to know about your VA entitlement that the company isn't very clear about.
Your VA entitlement doesn't guarantee you financing on a home loan. What it does, is guarantee you eligibility to apply for a VA home loan. Once you have your entitlement, you then will send that over to your lender once the lender has pre approved you for a home loan based off of your credit score, and debt-to-income ratio. If you weren't aware that you needed to get your entitlement to use your VA loan, that is not a problem. On average, it takes about 2 weeks for the lender to request the entitlement and get it mailed to them. Since a typical VA loan takes 30 days, the document will be to the lenders office in plenty of time for closing on your new home.
When you use your VA loan, you will have an appraisal contingency in the contract. This means that your loan is subject to the appraisal coming in at the sales price that you and the seller have agreed upon. Because you are getting a VA loan, you will have a VA approved appraiser. The appraiser IS NOT a home inspector. They will inspect big items to assure there aren't any structural problems, for example. However, this is to make sure the home fits into the VA guidelines for financing the home. The VA has to make sure they are backing a sound investment, and therefore have guidelines that need to be met in the home.
From here, the appraiser will turn in his report. He has 10 working days from the date the appraisal is ordered to go out to the property and turn the report in to the lender. The appraiser could go out on day 2, but can hold onto the report until day 10. There are a couple things that can happen when the appraisal comes in:
- The report shows the needed value and meets the contract sales price with no repairs needed.
- In this scenario, congratulations! You are ready to go to the closing table!
- The report comes in lower than the contract sales price.
- In this scenario, the entire contract goes back into negotiations. If the seller isn't able to sell at the lower appraisal price, then they may need you to lower some of the closing costs being given, etc. The seller can only sell the home at what the appraisal comes in at if using the VA loan. The buyer is allowed to bring cash to the closing table to cover the rest that the bank won't cover, however, this HIGHLY frowned upon. Don't buy a house that doesn't meet the value.
- The report comes in with a couple repairs/improvements needed.
- In this scenario, the repairs must be fixed by the seller if they want to sell their own to this VA buyer. If repairs are called on the appraisal, they must be fixed. Once they are fixed, a "re-inspect" will need to be ordered for the appraiser to come back out and confirm the completion of repairs. The "re-inspect" fee costs about $75.00 and is typically charged to the home buyer, however, sometimes this can be negotiated to switch sides. Keep in mind the seller is already making repairs they didn't plan on, so paying out even more money may not be feasible. From here, the FINAL report will come in and now you are good for closing.
Getting an appraisal on your home before you head to closing is very important. VA and FHA loans require them, however, conventional loans may not. You need to know what you are getting yourself into and understand the value of your home before you sign the bottom line.
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