Everything Veterans Should Know About the Appraisal Process

Image by Shonda Ranson from Pixabay

Veterans who plan to buy a home using their VA Home Loan benefit have to undergo several steps where they need to settle several upfront fees before they can start moving into their dream home. Appraisal is on top of the list of fees that Veterans need to pay upfront, and it’s a process that every Veteran should undergo before underwriters decide their fate. The VA requires a home appraisal to ensure that Veterans and their families get a quality home.

The appraisal process immediately follows once a Veteran homebuyer and the home seller finally affix their signatures on the Purchase Agreement. Like any normal homebuying process, an appraisal cost can go around between $300 to $500. Factors including location, size of the house, and type of property can affect appraisal cost. Normally, lenders require appraisals to find out if it’s worth it for them to take the risk of funding a loan and have the property as collateral if the Veteran borrower starts to fall behind with his or her mortgage payments. Mortgage lenders also need to appraise the property to ensure that the loan a Veteran will take closely matches the value of the home.

Home appraisals usually take 12 to 14 business days to complete. It’s the appraiser’s job to provide information to lenders if a home will meet their underwriting standards and if they’ll benefit from having it as a collateral. Veteran homebuyers can only get the loan amount they need if the home yields enough appraisal value and the lender will approve it.

3 ways a Veteran homebuyer can deal with a home with low appraisal value:

Typically, veterans are lucky if an appraiser determines the home that they plan to buy has more value compared to the loan amount they’re going to take. It only shows that the listed home has more than enough equity to secure the loan. However, there might be cases when a VA-approved appraiser returns with a “low appraisal” rating for a home which means there’s more loan than its value.

Veteran homebuyers may not get the loan amount they need if the home they’re planning to buy has a high LTV or Loan to Value ratio. But there are three available options for them if they want to pursue with the purchase:

  1. Request for an ROV or Reconsideration of Value – Veterans may ask their real estate agent to provide additional information to the lender such as valid sales data if they think that the home is poorly appraised. The appraiser will look if the added info can improve the home’s value.
  2. Renegotiate for a much lower price – Veterans may renegotiate the sale price with the seller to match or maybe even lesser than the appraised value.
  3. Shell out more cash at closing – This is an option for Veteran homebuyers who did not get a favorable ROV or if the seller doesn’t want to lower the sale price to at least match the appraised value to cover for the difference.

While appraisals determine the home’s value, veterans need to keep in mind that appraisal results are for the benefit of the lenders, not the homebuyers. Although not required, Veterans may want to have the home inspected to better understand the quality of the home they are buying.

Veteran homebuyers who obtain VA-backed home loans are required to have a home appraisal for a lender to find out if the property has enough equity to secure the loan.