VA Appraisal for Refinance: What Veterans and Service Members Need to Know
A VA appraisal is a professional evaluation of a home's value conducted by a VA-approved appraiser as part of the VA loan process, including refinancing. It ensures the property meets the Department of Veterans Affairs’ minimum property requirements and confirms that its value supports the loan amount.
- VA appraisals ensure the home’s value supports the refinance loan amount.
- Rules differ between VA cash-out refinances, which require appraisals, and VA IRRRLs, which are generally exempt from full VA appraisals.
- Preparing your home and paperwork can accelerate the process and help secure favorable outcomes.
While a VA appraisal is required for most refinance types, there are exceptions, such as the case with an interest rate reduction refinance loan, or IRRRL. Understanding this process helps veterans avoid delays and pitfalls associated with refinancing.
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What Is a VA Appraisal?
A VA appraisal is a mandatory evaluation performed by a VA-approved appraiser to determine a home’s current market value and ensure it meets the VA’s Minimum Property Requirements. This appraisal is required for most types of VA-backed refinance loans, particularly cash-out refinances. It verifies the home’s value to ensure it justifies the new loan amount, and assesses the property’s condition to confirm it is safe, structurally sound, and sanitary.
A VA appraisal differs from a standard home inspection in several ways. For one, it is required for most VA-backed loans, including many refinances. A standard home inspection is optional but highly recommended. Additionally, a VA-approved appraiser conducts a VA appraisal, while a standard home inspection is performed by a licensed home inspector who is not affiliated with the VA.
When Is a VA Appraisal Required for Refinance?
VA Cash-Out Refinance
A VA cash-out refinance replaces an existing mortgage with a new loan for a higher amount, providing cash for home improvements or other financial needs. It always requires an appraisal to determine market value.
VA IRRRL, or Streamline Refinance
An Interest Rate Reduction Refinance Loan, or IRRRL, allows veterans and service members to lower their interest rate or monthly payment without requiring a cash-out transaction. A VA IRRRL typically does not require an appraisal, but lenders may request one.
Other Refinancing Situations
There are unique refinancing situations where an appraisal may still be required, such as when equity concerns are present. If there is little or no equity in the home, or negative equity where the mortgage balance exceeds the home’s market value, lenders may require a VA appraisal to:
- Confirm the current market value
- Ensure the refinance does not result in an unacceptable loan-to-value ratio
- Mitigate risk of over-lending, especially in declining or volatile housing markets
How the VA Appraisal Process Works
Ordering the Appraisal
Only the lender can order an appraisal through the VA’s online portal, known as the WebLGY system. Borrowers cannot contact appraisers directly or select who performs the appraisal. These restrictions help ensure an unbiased and standardized process.
Assigned VA-Appointed Appraiser
The VA assigns a certified and VA-approved appraiser familiar with local market conditions. The appraiser is chosen from a rotating list to promote fairness and reduce conflicts of interest. Once assigned, the appraiser will schedule a visit to the property.
What the Appraiser Evaluates
The appraiser will evaluate the home’s market value based on recent sales in the area that are comparable to the property, as well as its overall condition. They also inspect for compliance with the VA’s Minimum Property Requirements, ensuring the home is safe, structurally sound, and sanitary. This includes checking for issues such as roof damage, exposed wiring, or signs of pest infestation.
Appraisal Timeline
The average turnaround time is typically 7 to 14 business days, although it may vary by region due to market demand or appraiser availability. Rural areas or high-volume markets may experience delays. Once completed, the appraisal is submitted to the lender and reviewed as part of the loan approval process.
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VA Appraisal Costs
While VA appraisal costs vary by state, they typically range from $600 to $900. The borrower normally pays for the VA appraisal, whether it is for a purchase or a refinance. This fee is often paid upfront along with other closing costs, and it is non-refundable, even if the loan does not close.
Purchase fees vary depending on the property type, location, and the availability of the appraiser. However, with refinance appraisals, lenders may charge a slightly higher fee if the refinance is complex or requires a faster turnaround.
Common Reasons VA Appraisals Cause Issues
Home Value Comes in Too Low
When a home’s value is too low, it can affect approval for a refinance or the loan amount. For instance, cash-out refinances may not qualify you to borrow the full amount you wanted. Similarly, if the value is less than the current loan balance, refinancing may not be possible without additional funds or restructuring the loan. Lenders base their loan decisions on the loan-to-value ratio. Thus, a low appraisal can prompt a denial or reduced loan terms.
Property Condition Fails MPRs
You may be required to make repairs before refinancing can proceed. VA appraisers evaluate whether a home meets basic safety, livability, and structural standards. If issues are discovered, the appraiser will note them, and the lender will require repairs before closing the refinance.
Delays in Appraisal Scheduling or Reporting
Several issues can trigger appraisal-scheduling or reporting delays, such as limited availability of VA-approved appraisers in your area, high demand in the local real estate market, and property access issues. To avoid setbacks, you can take proactive steps, including the following:
- Work with a lender who has experience with VA loans and can order the appraisal in a timely manner.
- Ensure the appraiser has easy access to the property and any outbuildings.
- Be responsive to any requests for additional information or scheduling.
How To Prepare for a VA Appraisal When Refinancing
Preparing for a VA appraisal when refinancing can help ease the overall process and minimize any potential issues that may arise. Take the following steps:
- Tidy up the property and complete minor repairs.
- Gather relevant documents, such as tax records and permits for recent upgrades.
- Be flexible when scheduling.
Find Your Dream Home with a VA Home Loan
Learn more or apply now with Novus Home Mortgage
Alternatives if Your VA Appraisal Falls Short
If your VA appraisal does not meet eligibility requirements, you can do the following:
- Request a Reconsideration of Value, or ROV: You can work with your lender to submit an ROV to the VA if you believe the appraiser missed key details or used inaccurate comparables.
- Provide additional comps or market data: Submitting information about recent, nearby sales that better reflect your home’s value can help support your case for a higher appraisal.
- Explore lower refinance amounts or different loan types: If the appraised value will not support your original plan, adjusting your loan amount or considering a conventional refinance may offer alternative paths forward.
Need Help Securing Your VA Home Loan?
If you or your loved one needs help securing a VA home loan, we encourage you to speak with a VA-approved lender about refinance options. They can review your eligibility and benefits to determine if you are a suitable candidate for the program. They can also begin preparing for an appraisal if you are considering a cash-out refinance.
Veterans Guide provides resources and support to help veterans access the benefits they’ve earned. Contact us today to learn how we can help you.
