VA loans have a variety of requirements pertaining to the borrower. However, are you aware of the minimum property requirements as well? The MPRs can make or break your chances to secure a VA loan.
What are the Minimum Property Requirements?
First, let’s look at the definition of Minimum Property Requirements. They are the standards the VA set for every home they insure. If a home does not meet these requirements, it is not eligible for VA financing. A lender may give the seller time to repair the issue if it’s minor. However, the VA will not allow any lender to close on a VA loan until it meets all requirements.
The idea of the MPR is to ensure the home is safe and sanitary. The VA insures loans in order to help veterans have a decent home. They provide 100% financing and the guarantee to the lender that they will repay them if the veteran defaults on the loan. In exchange, they ask that the home is in decent condition so the VA’s investment is not high risk.
The Minimum Property Requirements aren’t anything extravagant. A lot of homes meet the requirements as they are pretty standard things you would want for your home as well.
The requirements include:
- There must be enough room for sleeping, eating, grooming, and living for your family size. In other words, the home must have basic amenities.
- There must be working electricity and heating. The home must have the ability to remain above 50 degrees.
- The home must possess a working water heater.
- The drinking water in the home must be safe.
- The septic system (whether private or public) must be in good working condition.
- The roof must not only be decent, but also have enough life left in it.
- Any crawl spaces must be well ventilated and have easy access.
- The home must have easy access from a public street.
- There should not be any lead based paint. If there is, there should not be any chips or paint defects.
- There cannot be any termite damage
- There cannot be any mold.
Taking Care of the Issues
If the appraiser determines any of the above issues are a problem, the home will need repairs. Generally, the seller should arrange for and pay for the repairs. Typically, lenders do not allow the buyer to pay for the repairs. The home is not yours yet and there is no guarantee that the loan will go through. If the seller cannot pay for the repairs, the next best thing is for the realtors to provide a credit in order for the repairs to be done.
If no one can handle the repairs, you will have to back out of the contract. The VA will not back a loan for a home that does not meet the Minimum Property Requirements.
The Point of the Minimum Property Requirements
It may seem like the MPRs are yet another obstacle in getting a loan. On the contrary, though, they are a way to help protect you. The VA has several reasons why they will not insure the loan:
- It’s a high risk – The lender funds the loan, but the VA guarantees the lender that they will pay them back if you default. If the VA takes possession of the home, they will want to sell it. If there are issues with the home, they will have to put money into it, fixing it up in order to sell it. The VA loses out on the deal, despite the funding fee you paid at the onset of the loan.
- It’s a burden – Buying a home that has issues can be a financial burden for you. Taking on a new loan at 100% of the value is a big deal. You now have a new mortgage payment, plus insurance and taxes you must pay. If there are major defects with the home, it can put financial strain on you. This can make it difficult to make the mortgage payments. This again, puts the lender at risk.
Paying for a Home Inspection
Even though your appraiser does a thorough inspection of the home, making sure it meets the MPRs, you should still pay for an inspection. It is not required by the VA or by law. But, it protects you. The inspector will dig deeper into many areas of the home. He may come up with issues that the appraiser misses. The appraiser must check boxes on the MPR checklist and determine the value of the home. That’s all he has to do. If there are issues that are not visible to the average person, it may get missed.
Paying for the appraisal and looking for the Minimum Property Requirements protects everyone involved. The lender doesn’t enter into a bad investment. You also get a home that you know is worth its value and not going to be a money pit that drains you financially. The MPRS help you determine that you are buying a property that is worth the money you pay for it.