So You Want to Get a VA Loan?

When I realized that Andy had applied for a VA loan instead of a regular mortgage I reacted instantly by researching VA standards on HUD. I wanted to make sure our cute (but older) home wasn't going to cause us an immense amount of grief. Also, I spoke to our realtor and asked her to make an addendum to our offer. We would be willing to consider a counter offer including the cost of mandatory repairs within reason. The seller accepted our offer essentially pending VA inspection.

 So what's the deal with a VA Loan?

First you have to be a veteran.

Sorry folks. No military time, no military benefits. 

VA Loans are a favorite of most banks because they are 100% insured by the government. If the home owner doesn't pay, the government will cover the loss. When you call your lender to get pre-qualified for a mortgage, one of the first questions they will ask is, "Are you a veteran?"

VA loans were designed to allow veterans or their spouses (if not remarried) access to home ownership with or without a down payment and in most cases, where private financing was not available. For example, traditional Fannie Mae loans allow the home owner to purchase a home where the monthly payment would be approximately 28% of the gross monthly income whereas these loans allow 41%. Also VA financing often offers lower interest rates and other benefits such as $6000 for energy efficient improvement.

These loans have standards. Regular mortgages are granted based on overall appraisal value but the home purchased via the VA must meet certain standards not only to protect the VA's investment but also to protect veterans. Honesty is undervalued in real estate. 

After choosing a home, being approved for a mortgage and making an accepted offer, the homeowner must pay approximately $400 for an appraisal by a certified VA Inspector.   

If you're wanting to purchase a home using VA financing, making sure that it meets their standards can make or break your purchase. You may end up losing your dream home because the seller isn't interested in fixing the problems. Always have a back up plan. 

So what are they looking for? This is my HUD VA Appraisal Overview.. paraphrased:

Zoning: Residential only. When searching for a home, some offices will be on websites such as realtor.com. These are not zoned residential. Many time this will be stated on the overview but you must make sure before proceeding with VA financing.

Access: Must have safe and private access to the home. Driveway etc. 

Adequate Space: The home has to have enough space and a REAL kitchen, bathroom, living and sleeping space. This sounds silly but... I think I feel a story coming on..... 

A few years ago, prior to my having children, some friends and I decided to move into the back of a store front and start our own non-profit Internet Cafe in our town to be actively involved in meeting local needs. It was called The Center. We lived in storage rooms and created a make-shift home in order to see our dreams be established. We shared our bathrooms with the public. We took showers at our church. We lived our lives on a stage with a town of approximately 8000 people able to see though the large glass windows. 

This is an example of NOT GONNA HAPPEN. Idyllic? Sure. Practical? Noway. 

Water: Must have domestic hot water aka a water hose doesn't count. Must have safe method of sewage disposal (no chamber pots) and a continuous safe supply of water for drinking etc. They also prefer that you not have a well. They would rather the property be connected to a public system to ensure standards are regulated. 

Heating:  "Must be adequate for healthful and comfortable living conditions" If you have a wood burning stove, there has to be other means of heating your home to maintain a minimum temperature of 50 degrees Fahrenheit. Solar panels? HUD has regulations for that. Basically? You have to have a back up plan so your kids don't lose toes.

Electrical/Plumbling: No fire hazards. Everything must be useable and have some life left to them. There will be no getting VA approval if everything in your 1940's built home is original issue... if it even works.

Roof: No leaks. Also... something that surprised me was, they want it to be economical to maintain.

Consumer reports did an article on the best roofing options. Good stuff.

If the roof has to be replaced and there are three or more layers of shingles, the seller has to remove all of the old shingles first. 

Crawl Space/Ventilation/ Drainage: There has to be access that doesn't have any debris it has to be properly vented. The floor joists have to be high enough to provide enough room for someone to work on it if need be. The inspector will look for ponds of water under the house or excessive dampness. If he finds any, the seller has to fix it before the purchase can commence.  Gradation of the property and natural ventilation in both the attic and the crawlspace/ basement must be adequate enough to prevent excess moisture buildup aka mold and overall damage to the structural quality of the home.  Here are some examples of what to look for:

Mold damage

Puddles

Sagging floor joists

No No's: Termites, defective construction, poor workmanship, evidence of continuing settlement, leaks, puddles where puddles should not be and overall decay. Nothing hazardous to health of the buyer or to the structural soundness of the overall dwelling (MOLD)

And the biggie in most older homes... 

Lead Based Paint: Has to be tested to insure that the levels of lead aren't above those permitted by law. No chipping, cracking or overall defective properties. If this exists... the seller will HAVE to get it removed through an extensive process which can be a pain in the butt. 

We don't think any of these things will be an issue in our new home. (Whew!!) If they were, I'm not sure we'd want the home anyway. Some minor electrical issues, or small scale leaks are easily and affordably fixed. Structural damage and overall poor construction isn't.

 It may seem like a hassle, but if you're eligible for VA Financing and the home you're wanting to purchase meets the requirements or close enough, give it a try. It can almost take the place of a home inspector if you're willing to take the risk. 

When buying using a Fannie Mae mortgage, this is NOT the case. Get a home inspector. Do not forgo this. You will regret it. A lot of structural damage isn't visible to the untrained eye. Even your realtor misses things. Do not buy your home and subject your family to the misery of an inadequate housing situation. 

So what now? Well.. paperwork. We'll have a closing date soon.  I'll keep you posted :)