When it comes to VA loans, the home appraisal is one of the most important steps along the path toward closing. The appraisal can determine whether the property is eligible for VA-backed mortgage financing.
This article will explore the minimum property requirements for VA loans in Washington, where they come from, and how they can affect you when buying a house.
A Government-Backed Mortgage Program
VA home loans are backed by the federal government, under the management of the U.S. Department of Veterans Affairs. The VA gives mortgage lenders a partial guarantee that provides additional protection from financial losses from borrower default.
Because of their involvement, the Department of Veterans Affairs has also established some minimum property requirements for VA loans in Washington. These home requirements can be found in chapter 12 of “VA Pamphlet 26-7,” which serves as the official handbook for mortgage lenders.
This is an essential concept for Washington home buyers to understand. If a particular home does not meet WA’s minimum VA loan requirements for safety or structural soundness, it might not be eligible for financing. The seller would probably have to make certain repairs to bring the home up to standard.
According to the Department of Veterans Affairs, the minimum property requirements (MPRs) are intended to “protect the interests of Veterans, lenders, servicers, and VA.”
Why Take Out a VA Loan?
If you’re a current or retired service member, there are several reasons why you should consider a VA-backed home loan than a conventional or FHA mortgage:
- No down payment: You can finance up to 100% of your home’s purchase price with a VA home loan, which means no down payment is required. Compare this to FHA and conventional loans, which require at least a 3.5% or 5% down payment. This can translate into tens of thousands of dollars you would not have to come up with when buying a home.
- Down Payment Comparison: As you can see, the VA loan requires no down payment, whereas the FHA and Conventional loans require $17,500 and $25,000, respectively.
- Annual Savings with VA Loan over 30 Years: The savings are roughly $583.33 per year compared to FHA and $833.33 per year compared to a Conventional loan.
- No Private Mortgage Insurance (PMI): If you apply for a conventional home loan without at least a 20% down payment, you must pay PMI, which can add a few hundred dollars to each monthly mortgage payment. Instead, a VA-backed loan does not require PMI.
- Competitive rates: Generally speaking, VA loans have lower rates compared to other mortgage programs, such as conventional loans. Again, this could be another significant money-saver for you.
- Flexible credit score and income criteria: VA loans are easier to qualify for compared to other mortgage options in terms of credit score and income criteria. Since the government is backing the loan, this offers lenders much more protection in the event that you default on your mortgage payments. As such, lenders are more willing to offer lower rates. The only thing you need to consider is the minimum VA loan requirements.
Minimum Property Requirements for VA Loans in Washington
The official minimum property requirements for VA loans in Washington go on for over 50 pages. But there’s no need for a home buyer to sift through all of that. Here are some of the most important items contained in the guide:
- Safe and Sanitary: The home being purchased should be sanitary and safe. It should be free from safety or health hazards that might pose a risk to the occupant.
- Structural Integrity: The property must have sound structural integrity and be free from significant defects affecting its safety or livability.
- Roof and Attic: The roof should be in overall good condition without evidence of leaks or significant damage. If there’s an attic, it needs to have the proper ventilation.
- Heating and Cooling Systems: An air conditioning or cooling system is not required. But if it’s present, it should be in good working order. In areas with a mild climate, heating may not be required. Otherwise, the home must have a functional heating system that can maintain a minimum of 50°F in the winter.
- Plumbing and Electrical: The home’s plumbing and electrical systems should comply with local building codes and be in good working order. Significant issues like faulty wiring or leaks must be addressed before purchase.
- Water Supply: The property should have a safe, potable (drinkable) water supply with adequate flow and pressure to meet the home’s needs.
- Sewage Disposal: The property must have a safe and adequate sewage disposal system.
- Lead Paint: Homes built before 1978 must be checked for lead-based paint hazards. According to the VA: “Lead-based paint constitutes an immediate hazard that must be corrected unless testing shows that lead is not present in the paint at a level above that permitted by law.”
- Termite Inspection: The VA requires a wood-destroying pest inspection for much of the U.S. But they’re usually not required in the state of Washington, which has a relatively low probability for termite infestation.
- Crawl Spaces and Basements: These areas should be dry and free from moisture issues that could lead to mold or structural problems.
- Private Well and Septic Systems: Properties with private well and septic systems must meet local health department regulations and be in good working order.
- Environmental Hazards: The property should not be located in an area with environmental hazards that could affect the homeowner’s health or safety.
These requirements for a VA loan are basic. There’s a lingering misconception that VA home appraisals in Washington are overly strict or invasive. But that’s not the case. The VA is mainly concerned with the health and safety of the occupant, along with the resale potential for the home.
The minimum property requirements for VA loans in Washington also align with the expectations of a typical home buyer. Of course, you want your new home to be structurally sound, with a functioning electrical and plumbing system, and away from environmental hazards. We all want those things.
Helpful Tips for Washington Home Buyers
From a Washington home buyer’s standpoint, the best-case scenario is to find a home in good condition that meets or exceeds the minimum VA home loan requirements. That way, there are fewer headaches and hassles to worry about.
Here are some tips for finding a property that meets the MPRs:
- Work with a real estate agent who understands VA loans and property requirements.
- Try to focus on neighborhoods that are known for their well-maintained properties.
- Realize that the newer the home, the more likely it is to meet the abovementioned MPRs.
- When viewing a home, watch for common issues like structural damage, plumbing problems, etc.
- If the appraisal reveals MPR issues, see if the seller will make the necessary repairs to facilitate the purchase.
Loan Options For Veterans and Service Members
Depending on your situation and needs, there are a few VA-backed loan options available to consider:
If you’re simply looking to buy a home and need financial assistance to fund the purchase, a VA-backed purchase loan is what you need. Again, to qualify, your home must meet minimum VA home loan requirements.
Cash-Out Refinance Loan
If you already own a home and need a large sum of money to cover the cost of a significant expense, such as a home renovation or a new car purchase, then you can access your home’s equity. A VA cash-out refinance loan involves taking out a new mortgage bigger than your existing one. Use your new home loan to pay off your mortgage, then use the difference as you wish.
There are criteria to meet to qualify for a cash-out refinance, including having a minimum equity amount in your home already accrued.
Interest Rate Reduction Refinance Loan (IRRRL)
If you already have a VA home loan and are looking to cut down on your monthly mortgage payments, then a VA-backed IRRRL may be worth considering. With this loan option, the mortgage interest rate on your home loan can be reduced by refinancing your current VA home loan. A lower interest rate can significantly lower your monthly mortgage payments, making your mortgage more affordable and easier to manage.
General ‘Wear and Tear’ Is Acceptable
Washington has its fair share of older neighborhoods and homes like any other state. A few years ago, a Census Bureau study found that the median age of owner-occupied homes in the U.S. is 40 years. Most of these older homes have some “wear and tear.”
When using a VA loan in Washington, general wear and tear and cosmetic flaws typically do not cause any issues. The VA is mainly concerned with significant structural damage, health and safety hazards, and other habitability issues.
As it stated in chapter 12 of the aforementioned handbook:
“The appraiser should not recommend repairs of cosmetic items, items involving minor deferred maintenance or normal wear and tear, or items that are inconsequential in relation to the overall condition of the property.”
Before applying for a VA home loan, understanding the property requirements for VA loans in Washington is essential. Unless these criteria are met, you may have trouble qualifying for this type of mortgage.