The VA home loan program applies to several property types:
- Single-family homes
- Multifamily properties with up to four units
- Condominiums (must be a VA-approved condominium project)
- Manufactured homes
You can’t use a VA loan to buy an investment property or a seasonal vacation home, which is sometimes referred to as a second home. But with sufficient entitlement, VA borrowers can buy another home that becomes their primary residences and rent out the old one. In fact, there is no limit to how many times you can use a VA loan to buy a home, as long is it meets property and eligibility requirements.
VA borrowers can buy a multifamily home, live in one unit, and rent out the others.
VA minimum property standard requirements (MPRs)
VA loans include strict minimum property standard requirements on a home’s livability. Your private lender will schedule a VA property appraisal with a VA-approved appraiser who will focus on two areas: home value and property standard requirement issues.
An appraisal tells lenders whether the home is worth the amount of money the veteran is paying. If not, that’s not good for the veteran, lender, or the VA.
The VA appraisal will show whether the collateral for the VA home loan — meaning the property itself — is valued for the amount you want to borrow. If it’s not, you can pay the difference in cash to move forward with the loan. But if the home appraisal comes in lower than the asking price, and the seller does not want to reduce the price, you may decide to move on and look for another home.
A VA appraisal also verifies that a home is sanitary, safe, sound, and meets all VA home loan minimum property standards. They inspect the property on which the home sits, the home itself, and any additional structures that have been built on the site. All structures, even the ones you won’t be living in, must meet all VA requirements, conform to the area in which the property is located, and meet all local zoning requirements.
If a previous owner built a workshop that’s in great shape — no water damage, fully functional, maybe it’s even wired for electricity — the appraiser may add that to the property value, giving it a boost.
But if there’s a dilapidated shed that could collapse as soon as you enter it, the appraiser may decide the structure needs to be removed before the sale can go through.
That’s when you go back to the seller to ask if they’ll take down the shed (or remedy whatever issue was called out). If not, you won’t be able to close on the loan.
Repairs may have to be completed on the house, or the property’s additional structures, prior to closing on the property to bring it up to the VA’s minimum property requirements.
If you’re worried about putting an offer on a house that won’t qualify for VA financing, work with a real estate agent who is familiar with VA property requirements. An experienced agent should be able to spot properties with too many red flags for VA borrowers and can show you homes more likely to meet the necessary standards.
APPRAISAL VS. INSPECTION
Appraisals and inspections can both be part of the homebuying process. But it’s important to remember that they’re not the same things.
Mortgage lenders require appraisals on all loans — VA and otherwise. First and foremost, the appraiser verifies that the home’s value is the same or higher than the purchase price. If not, the buyer and the lender could be at risk of overpaying and over-lending.
Secondly, the appraiser looks for major structural issues or hazards and determines the value of the house, and lenders use that information to process (or deny) a loan.
An inspection is solely for the borrower’s benefit. Inspections are typically optional, and private lenders do not require them to obtain a mortgage. But you don’t want to skip this step.
A home inspection can reveal problems with your plumbing, electrical, and HVAC systems, according to the American Society of Home Inspectors. An inspector will also examine your windows, doors, basement, and attic for potential issues.
VA will require a termite inspection for all properties in areas where the risk of termite infestation is “moderate to heavy” or “very heavy.” If you’re worried about termites and mice or chemicals such as radon, you can schedule specialty inspections to check for those.