VA appraisals VA loans

VA Loans, Converted Garages, and State/Local Code: A Reader Question

July 17, 2014

VA Loans, Converted Garages, and State/Local Code: A Reader Question

031-logoA reader asks, “Can you buy a home VA financing with a converted garage? No permit was pulled but a lic contractor did the work. Can we put funds in escrow to have the wall removed to complete the sale?”

Situations like these depend greatly on a variety of factors that are outside the VA loan rules, minimum property requirements, and other VA regulations. Borrowers should know that VA minimum property requirements are not the only factors in whether a home will pass the VA appraisal–there are state and local building codes and sometimes lender participation issues that may contribute.

In the case of this reader question, state and local building code will play an important part in whether the transaction is approved. Does the property as it currently exists pass the VA appraisal? If it does not meet state or local building code, corrections may be required as a condition of loan approval. Those corrections may need to take place and a compliance inspection carried out before the loan can be finalized.

The work the reader question mentions would also need to live up to state/local building code. The escrow fund issue may require the participation and approval of the lender, so the reader will need to work with the lender in order to get an answer there. Different financial institutions have different standards and requirements. What applies with one company may not apply with another.

The lack of a permit as mentioned in the reader question may prove to be a sticking point depending on the state or local requirements. Could the borrower be required to pay for the permit retroactively before the building will be considered up to code? That is outside our ability to speculate, but it’s definitely a question worth thinking about for anyone in similar situation.

Do you have questions about VA home loans or refinance loans? Ask us in the comments section.

  1. Nancy hall

    Could you tell me if you need to have a garage for a VA loan? The property I am looking at is a prefab. Home. On its own property . Perm. Foundation. Built in late 90's. Thank you

  • Joe Wallace

    VA loan rules don't specify such a requirement--you should explore state/local building code to see if any such requirement exists in your local area, however, since VA requirements aren't the last word when it comes to building codes.

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