VA Appraisals–Are They Required For Every VA Loan?
The VA appraisal rules are in place for a variety of reasons. One is to insure the property being purchased with a VA insured mortgage is safe and habitable for the borrower.
Another is to insure the property lives up to VA standards in other ways that affect the value of the property. A third reason for VA appraisals is to establish the fair market value of the home for the purposes of determining the VA loan amount.
Under these rules, it’s clear that the VA is keen on protecting the investment made into any given property. But do all VA loans require an appraisal? Are there times when one isn’t necessary in order to approve a VA home loan?
There are indeed some instances where an appraisal is not required. Those instances depend greatly on the type of loan or individual circumstances.
For example, VA rules state that for Interest Rate Reduction Refinancing loans, no appraisal is needed. The purpose of this type of VA loan is to re-work the loan into a more favorable state for the borrower with either a lower interest rate, lower mortgage payments, or both. No cash goes to the borrower in this type of loan, so no review of the property’s value is required.
Contrast that with the appraisal requirement in a VA Cash-Out Refinancing loan. These loans do require a new appraisal–money is going back to the borrower, and the loan amount would be based on the value of the property. If the property has increased or decreased in value, the amount of the VA loan would be issued accordingly. That’s not to say that the VA promises to guarantee a VA refinancing loan for 100% of the value of the property or guaranteed the same amount for every cash-out refinancing loan for comparable properties, but the property value does influence the loan amount.
In some cases there may be an appraisal which is still in effect–if one buyer paid for an appraisal and chooses not to close the deal, a second buyer could be permitted to use the same appraisal for a VA loan–if that appraisal is still current and the loan closes in time according to VA loan rules covering this circumstance.
In cases where the borrower doesn’t agree with the results of an appraisal, the VA has rules on what may be done. According to the official site at www.VA.gov, “Any party of interest to the transaction can submit a request (written) through the lender to the fee appraiser on whose appraisal the current VA valuation is based, for a reconsideration of value. Requests other than to change value will be submitted through the lender to the VA office of jurisdiction.”
Such request does not guarantee a reappraisal, and VA rules forbid second appraisals simply to change the unwanted outcome of the first decision. But in cases where it is warranted, a second look may be justified–if approved by the VA.