Last week, the House approved legislation that would require the Department of Veterans Affairs to update its rules on appraisals of homes purchased using its home loan benefit.
Lawmakers on both sides have expressed concern that the VA home loan program puts veterans at a disadvantage compared to buyers with commercial loans, in part due to a lengthy appraisal process.
Under the program, private lenders provide the loans, but the VA guarantees a portion of each loan against default.
This model allows borrowers to obtain more favorable terms than would otherwise be possible, including no down payment, lower interest rates and limited closing costs.
But the program requires VA home appraisals and other qualifying steps that can lengthen sales closing time, frustrating buyers and sellers.
Testifying before the House Veterans Affairs Committee in December, VA officials said the average wait time for VA assessments was about 15 business days.
For non VA loans, the typical period is about two days.
The difference – and perceptions that delays are worse — means sellers are increasingly ignoring offers from buyers using the VA program.
A 2021 National Association of Realtors survey of home loans found that 94% of sellers were most likely to accept an offer with conventional financing, compared to 1% who said they would most likely accept an offer involving a VA loan.
VA appraisals also have a reputation for issuing below-market rates, according to many real estate agents.
Among the updates that Improved Access to the VA Home Loans Act of 2022 would require, the VA is expected to issue guidance on when to allow office appraisals, which are conducted through the tax records and other public documents rather than through in-person inspections.
The VA should further consider whether these computer-based appraisals save the borrower money and help in “situations where a traditional appraisal requirement could cause a delay significant enough to compromise the ability to a borrower to complete a transaction,” reads the text of the bill. .
“Every veteran deserves the chance to own a home and pursue the American dream,” said Rep. Mike Bost, R-Ill.
“With interest rates on the rise, we should do everything we can to make VA home loan benefits the best option for veteran buyers and sellers,” he added.
The bill must be passed by the Senate and receive the President’s signature before becoming law.
The measure has the support of the Senate.
Sen. Dan Sullivan, R-Alaska, introduced identical legislation (S. 4208) to the House in May.
Many – but not at all – National Guard Soldiers and Airmen are eligible to use the VA program to purchase or refinance a home.
To be eligible, guards must have six years of service, 90 consecutive days of Federal Title 10 service in addition to training, or 90 days of federally funded Title 32 service under state control with at least least a period of 30 consecutive days.
— By John Goheen