How a VA Lender Handles a Home Inspection and the Appraisal

The Quick Read: A VA lender does not require a home inspection, but it does require a VA appraisal on a purchase. The lender orders the appraisal, a VA-assigned appraiser values the home and notes repairs that fall under the property standards, and the loan cannot be guaranteed until those repairs are cleared. The inspection is your own tool, and it covers things the appraiser never tests.

Here is where files get confused. Borrowers call the appraisal a “VA inspection.” It is not one. Different people order them, different people read them, and they answer different questions. This piece walks through both, step by step, so the file stays clean. Details on Lendmire’s VA loan programs sit under the usual lender guidelines and full file review.

Key Terms Defined

• Appraisal: a value opinion from a VA-assigned appraiser, built on closed comparable sales, plus a check of the property against VA’s standards.
• Minimum Property Requirements: VA’s baseline that a home be safe, structurally sound, and sanitary.
• Notice of Value (NOV): the document that states the home’s reasonable value and the conditions that must be met before the loan can be guaranteed.
• Reasonable value: VA’s determination of what the property is worth for guaranty purposes. It limits what VA will back.
• Tidewater: a purchase-only early warning. If the appraiser expects a value below the sales price, the parties get a short window to send evidence.
• Reconsideration of Value (ROV): a request, made after the NOV, asking VA staff to review the value against market data.

Is a Home Inspection Required on a VA Loan?

No. The appraisal is required on purchases and cash-out refinances. The inspection is optional. VA’s own Buyer’s Guide calls the inspection optional but highly recommended, and says the appraisal does not take the place of one.

The NOV itself points the veteran that way. It explains how appraisal reports differ from home inspections and suggests the veteran may want an inspection. So the loan will not stall for lack of one. The risk of skipping it lands on the buyer after closing.

Across the wholesale programs Lendmire places VA files with, the inspection report is a buyer document. The lender does not need it to move the file. If the report surfaces a safe, sound, sanitary issue, that matters for the appraisal conditions. Anything else is a conversation between buyer and seller.

What the Appraiser Actually Does

The appraiser estimates market value and flags readily apparent repairs under the MPRs. That is the whole job.

Per VA’s Lenders Handbook, Chapter 12, fee appraisers must note readily apparent repairs and will not run operational checks on mechanical systems or appliances. They do not turn on the furnace to see how it behaves. They do not test every outlet.

Three limits matter inside a file:

• The appraisal is written “subject to” completion of any MPR repairs that look needed, and the value reflects those repairs.
• The appraiser cannot make the report subject to an inspection. The appraiser must recommend repairs, not inspections.
• Cosmetic items, minor deferred maintenance, and normal wear and tear are not supposed to be recommended as repairs.

That last point cuts both ways. Peeling paint on a sound house usually does not trip a condition. A failing roof the appraiser can see does.

The report follows USPAP and VA’s handbook requirements, and the appraiser is assigned through VA. Per Chapter 11, VA sets no minimum or maximum distance between the subject and the comps, but the appraiser has to explain comps pulled from suburban or rural markets. VA also sets no limit on the number of acres on a farm or acreage residence.

The Lender Workflow, Step by Step

The lender orders the appraisal, reviews it, and clears conditions before closing. Here is the sequence on a purchase.

1. Contract signed, lender orders the appraisal. After the purchase agreement is signed, the lender requests a VA-approved appraiser. The buyer generally pays the appraisal fee when it is ordered.

2. Appraiser assignment. VA assigns an appraiser from its fee panel in most cases. The buyer and lender do not pick one.

3. Site visit. The appraiser measures, notes condition, selects closed comparable sales, and records any MPR items.

4. Tidewater check. If the appraiser expects a value under the sales price, the appraiser must notify the requester and allow 48 hours for the agent, lender, and veteran to send evidence-based data. Per VA testimony to a House subcommittee, this applies to purchases. It is a data window, not an instruction to meet the contract price.

5. Report uploaded, NOV issued. A lender’s Staff Appraisal Reviewer or VA staff reviews the report and issues the NOV. The NOV lists the value and the conditions that must be met for guaranty.

6. Repairs and conditions cleared. Required MPR repairs get completed and cleared before closing. The loan cannot be guaranteed until then.

7. Reconsideration of value, if needed. If Tidewater did not close the gap, the veteran or lender can request an ROV after the NOV. VA staff review it against market data and amend the NOV if an increase is appropriate.

8. Appraisal copy delivered. Federal rules give the borrower a free copy of the appraisal. Under the CFPB’s ECOA valuations rule guidance, the applicant gets notice of that right early in the application process.

9. Closing. The guaranteed amount is tied to reasonable value.

What decides the outcome comes down to five things: closed comps and the appraiser’s adjustments, the gross living area the appraiser calculates, whether the home meets the MPRs, the NOV conditions, and the contract price against reasonable value.

Appraisal Versus Inspection

The appraisal serves the lender and VA. The inspection serves the buyer. That one line explains most of the confusion.

An appraisal passing does not mean the home is fine. MPRs are a floor. An aging water heater, tired HVAC, or a roof near the end of its life may not trigger anything on the NOV and still become a post-closing cost.

What Happens When the Appraisal Flags a Repair

The repair has to be completed and cleared before the loan can close. Someone has to pay for it, and that is a contract question.

Typical paths on a file:

• Seller repairs. The buyer negotiates for the seller to fix the item, and the repair is documented as cleared.
• Price or credit negotiation. The parties reset terms, though the loan still cannot be guaranteed until the condition clears.
• Waiver request. After the NOV, VA staff can consider a waiver of an MPR repair. Per Chapter 12, an inspection report is not required for that, but a licensed professional’s report helps make sure the veteran is fully informed. If approved, VA amends the NOV and may reduce the value by the contributory value of the waived repairs. The property still has to be habitable.
• Walk away. If the seller refuses and the buyer will not take the risk, the contingency language in the contract decides what happens to the earnest money.

VA’s Buyer’s Guide says a buyer may recover earnest money in some of these cases, but not out-of-pocket inspection or appraisal costs. The same guide suggests writing an appraised-value contingency and a satisfactory-home-inspection contingency into the offer. Those are contract tools, so confirm the wording with your agent.

When the Appraisal Comes In Low

A low value means the buyer brings cash for the difference, renegotiates, or walks. The VA loan cannot guarantee more than reasonable value.

The legal basis is 38 CFR 36.4339. The veteran certifies having paid in cash any difference between the purchase price and reasonable value. Plainly: after any ROV and renegotiation, bringing cash to closing is often a strong option beyond a price change.

That is why the 100% financing structure on purchases works only as long as the price is not above the appraised value. With full entitlement there is no VA loan limit, and no mortgage insurance of any kind. A buyer with remaining entitlement from an earlier loan may need a down payment, so speak with a loan officer on that point.

Two practical notes on the ROV:

• The veteran may pay for a second appraisal if the veteran requests the reconsideration. The veteran cannot pay for a reconsideration appraisal requested by the lender or seller.
• The ROV is a review of the existing report and market data. It is not an automatic second appraisal.

Condition and value are separate tracks. A home can pass every MPR and still come in under contract price. It can also hit value and fail a MPR.

Where the General Rule Breaks

Several property types and loan types change the handling.

• IRRRL (streamline refinance). Generally no appraisal, credit information, or underwriting is required, per Chapter 6 of the Lenders Handbook. A lender can still choose to require one under its own policy. That is a lender overlay, not a VA rule, so ask which one applies.
• Cash-out refinance. An appraisal is required, as on a purchase. Tidewater does not apply to refinances.
• Condominiums. New condominium developments need a 70 percent pre-sale requirement on the NOV, satisfied before guaranty.
• Wood-destroying insects. A pest report is a NOV condition in many areas, driven by state-specific local requirements. VA publishes its state local-requirements list for fee appraisers. Who pays for the report can be a negotiating point with the seller.
• Flooding. The VA Denver fee panel guide says regular flooding fails the MPRs whether or not the home sits in a flood zone.
• Existing versus new construction. Per that same guide, existing construction means previously occupied or over one year old, and it is appraised “as is” unless the MPRs require repairs.
• Acreage. No acre limit, but comp support gets harder in rural markets, and the appraiser must explain the comps used.

Costs and Cash at the Start

Plan for cash before closing, separate from the loan. The borrower generally pays the appraisal fee when it is ordered. The home inspection is a separate third-party cost the buyer pays. Any MPR repairs, a pest report, and a value gap also land before closing, so they hit cash-to-close and reserves rather than the loan itself.

Under VA’s Lenders Handbook, Chapter 8, the veteran can pay the VA appraiser and compliance inspector fees, plus reasonable itemized charges. Dollar amounts vary by market and lender, and they show up on the Loan Estimate and Closing Disclosure.

The funding fee is separate from all of this. On a purchase, first use runs 2.15% with less than five percent down, 1.5% with five to under ten percent down, and 1.25% with ten percent or more down. Subsequent use is 3.3% with less than five percent down, with the same 1.5% and 1.25% tiers above that. The fee can be financed, and it is waived for veterans receiving compensation for a service-connected disability and the other exempt groups. The certificate of eligibility from VA decides eligibility.

Underwriting is its own track. Residual income is the controlling test, and the 41% debt-to-income figure is a guideline, not a cap. Across the wholesale programs Lendmire works with, decision scores start at 580 and amounts reach $4,000,000 with full entitlement. All of it is subject to lender guidelines and full file review.

Common Mistakes on VA Appraisal and Inspection Files

• Treating the appraisal as the inspection. It is a value opinion with a safety floor, not a systems check.
• Skipping the inspection because the loan does not require one. The risk moves to the buyer after closing.
• Writing an offer with no contingencies. A low value or a flagged repair then leaves the buyer with fewer exits.
• Assuming Tidewater forces the value up. It is a window to send evidence, not a promise.
• Assuming a streamline never gets an appraisal. VA generally does not require one, but a lender can.
• Waiting on pest reports. If the NOV calls for one, it holds up clearing conditions.

Questions to Ask Your Loan Officer

• Is the appraisal fee collected when it is ordered?
• Does my area require a wood-destroying insect report on the NOV?
• If I get an inspection, does your lender want a copy, and does it add any condition of its own?
• If the value comes in low, who submits the reconsideration request?
• Is this a VA requirement or a lender overlay?

If you are buying a home and want to see whether a VA loan fits your file, Lendmire can help you compare the options and what each one asks of the file.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. VA Home Loan Guaranty Buyer’s Guide

2. VA Pamphlet 26-7, Chapter 12: Minimum Property Requirements

3. Chapter 11

4. VA testimony to the House Veterans’ Affairs subcommittee

5. CFPB’s ECOA valuations rule guidance

6. 38 CFR 36.4339 (eCFR)

7. VA Pamphlet 26-7, Chapter 6: Refinancing Loans

8. VA Denver fee panel guide

9. VA Pamphlet 26-7, Chapter 8: Borrower Fees and Charges and the VA Funding Fee