A reader asks, “I applied for a VA loan and the appraisal was done. The appraisal came back higher than the loan ($30,000 higher), but the lender says I have to make minor repairs to my house before I can proceed with the loan. My question is why do I have to make these repairs when the VA makes loans for home renovations ?”
An entire chapter of the VA Lender’s Handbook is dedicated to what the Department of Veterans Affairs calls Minimum Property Requirements. These requirements are listed to help VA appraisers know what homes should be approved for VA guaranteed mortgages as-is, which need corrections or repairs before the loan can be approved, and which homes should not be considered for VA mortgages.
According to Chapter 12, “ the MPRs provide a basis for determining that the property is safe, structurally sound and sanitary, and meets the standards considered acceptable in a permanent home in its locality.” When a VA appraiser looks at the property and recommends corrections, those corrections must be carried out to bring the home up to the VA’s minimum standards so the loan can be approved.
In some cases the corrections may be a sticking point between buyer and seller; some negotiation may be needed in order to proceed with the sale.
VA home loans that include money for upgrades, energy-efficient improvements or other additions aren’t designed to bring the home into compliance with VA requirements; the property must already be in compliance.
To require the borrower to pay more money in order to bring the property up to standards and purchase it would be an undue burden on the borrower. In other words, a VA loan applicant shouldn’t be asked to borrow twice–once to purchase the property and again to bring it into compliance so it can be approved for a VA guaranteed loan in the first place.
VA MPR rules are designed to insure that when the sale is closed, the home meets VA requirements, plus state or local building codes and other applicable regulations.
MPRs are subject to interpretation in some areas, and in others the rules are specific, clear, and non-negotiable. For example, any part of the home that falls within what the VA calls a “high voltage easement” cannot be approved for a VA mortgage. A home that does not live up to local building codes must have those issues addressed or the loan can’t be approved. A property that has certain cosmetic issues could still be approved for a VA guaranteed mortgage if the cosmetic issues don’t violate the minimum property requirements, but an appraiser would be responsible for making that decision.