Veterans using their VA home loan benefit are lucky enough to have limited closing costs. The VA restricts what VA borrowers can pay. Of the allowed costs, though, the VA home appraisal is one of them.
The VA appraisal helps lenders determine how much they can lend you. The value of the home is the lender’s collateral. If they lend you more money than the home is worth, they stand to face a major loss should you default on the loan. The VA won’t allow lenders to do this, which is why the VA appraisal is a cost you can bear.
The Cost of the VA Appraisal
The VA doesn’t dictate how much veterans can pay for an appraisal. It varies based on the usual cost for appraisals in your area. In general, you can expect to pay between $300 and $500 for an appraisal. In some high-cost areas or for larger/multi-family homes, the cost can reach as high as $1,000, though.
Who Orders the VA Appraisal?
Your lender is responsible for ordering the appraisal. They do so through the VA portal, though. The VA then assigns an approved appraiser in your area. The assignment of the appraiser is completely random and the VA doesn’t have a vested interest in who performs the appraisal. They just need approved appraisers that understand the VA process to ensure that the home is worth the VA offering their guaranty.
The VA appraiser isn’t necessarily harder on the appraisal than any other appraiser would be. The VA just makes sure the chosen appraisers understand the VA Minimum Property Requirements. They also make sure they understand that they are looking out for both the veteran and the VA. It doesn’t make sense to allow a home to be valued higher than it is as it only hurts the veteran and possibly the VA in the face of foreclosure.
The Difference Between the Appraisal and Inspection
It’s important to know that the appraisal and inspection isn’t the same thing. The appraisal helps the lender/VA determine the amount of collateral that the home carries. The inspection helps the borrower understand the condition of the home.
The VA doesn’t require an inspection, but they do highly recommend it. If you have an inspection contingency in your purchase contract, you can back out of the purchase should the inspection show that the home has issues that you don’t want to handle. It’s best if you do this before the lender orders the appraisal so that you can avoid the cost of the appraisal should you back out of the purchase.
While the inspection may cost you money upfront, it can save you money in the end. If the inspection shows that there are things wrong with the home, you may save yourself the $300 – $1,000 cost of the appraisal. If the inspection turns out okay, though, the appraisal can help protect your investment by ensuring the home is worth the price you agreed to pay for the home.