VA Loan Seller Requirements for Homes That Need Repairs

The Quick Read: No VA rule requires a seller to pay for repairs. The home does have to meet VA’s Minimum Property Requirements before VA will guarantee the loan. Who pays for a fix is a matter of the purchase contract and negotiation. A buyer can pay for required repairs, a seller can pay, or the two can split the cost.

A VA buyer is not asking the seller to do anything unusual. The loan is built on a short list of property standards, and the repairs that come out of the appraisal are a negotiating item. This article walks through how the process works, what the appraiser flags, where the general rule breaks, and how a buyer decides what to do when a home needs work.

What Does VA Actually Require of the Property?

VA requires the home to meet its Minimum Property Requirements. The VA Lenders Handbook, Chapter 12 says MPRs exist to make sure a property is safe, structurally sound and sanitary. A property also has to be free of hazards that threaten the health and safety of occupants or the soundness of the dwelling.

That is a habitability test. It is not a condition grade. A dated kitchen, worn carpet and a tired fence do not fail it. A roof that leaks, exposed wiring, or a foundation problem that threatens the structure can.

Across the wholesale programs Lendmire places VA files with, the most common misunderstanding is that VA wants a move-in-ready house. It doesn’t. VA wants a house that is safe to live in and that supports the loan amount. If you are earlier in the process and still sorting out how the program works, Lendmire’s VA loan programs page covers the basics: 100% financing, no mortgage insurance, and no VA loan limit with full entitlement, all subject to lender guidelines and full file review.

Does the Seller Have to Pay for Repairs?

No. The handbook has no language that assigns repair costs to the seller. Responsibility comes from the purchase contract and from negotiation between the parties.

VA also changed an older rule. VBA Circular 26-22-11 says a veteran may be charged for a wood destroying pest inspection where the Notice of Value requires one. It also says a veteran may pay for repairs needed to meet MPRs, and it encourages the veteran to negotiate those costs with the seller. Many older articles still repeat the claim that a veteran could never pay for termite work. That claim no longer holds.

So the honest answer has two halves. The seller is not obligated by VA. And the seller may still be the practical source of the money, because a buyer who can’t get the repair done can’t close.

How Is a Home That Needs Repairs Underwritten, Step by Step?

The process runs in a set order. The sequence matters because the key decision, who pays, is best made before the appraisal is ordered.

1. Settle the repair question in the contract. Decide who handles appraisal-required repairs before the appraisal happens. Contract terms govern this, not the VA handbook.

2. The appraiser values the home “subject to” repairs. The VA fee appraiser prepares the appraisal subject to completion of any MPR repairs that appear necessary. The estimated value then reflects the contribution of the completed work, per Chapter 12.

3. The appraiser stays inside a defined scope. Chapter 12 tells appraisers not to recommend repairs for cosmetic items, minor deferred maintenance or normal wear and tear. The appraiser is not testing the furnace or the plumbing like an inspector would.

4. VA issues the Notice of Value. The NOV states the value and lists the items needing repair to meet MPRs, according to VA’s Home Loan Guaranty Buyer’s Guide. If the NOV requires a pest inspection, the report and any repairs it identifies become conditions of the loan.

5. Repairs are completed and proven. Required repairs generally must be finished and verified before closing. Lenders keep invoices for inspections and repairs in the file, and the costs must be reflected on the Closing Disclosure.

6. Escrow is a limited exception. A lender may hold funds in escrow for repairs completed after closing. All the work must be done and the funds released before VA can guarantee the loan.

7. A waiver can be requested. Chapter 12 covers requests to waive an MPR repair. Treat this as the exception. It needs the lender’s cooperation, and safety-related items are the least likely to be waived.

A few things decide how any single file plays out. One is whether the condition is actually an MPR item or just cosmetic. Another is who pays under the contract. A third is lender policy, because lenders differ on whether they accept buyer-paid repairs or escrow holdbacks. The last is whether the work can be done and re-verified before closing.

Key Terms Defined

Minimum Property Requirements: VA’s standards for a home’s safety, structural soundness and sanitation, which a property must meet before VA guarantees the loan.

Notice of Value (NOV): The VA document that states the appraised value and lists any repairs needed to meet MPRs.

Subject-to appraisal: An appraisal that sets value on the condition that listed repairs are completed.

Funding fee: A one-time, reviewable VA charge that varies by use and down payment and is waived for exempt veterans.

What Does the Appraiser Flag, and What Stays Alone?

The line between a flagged item and a cosmetic one is the most useful thing a buyer can understand early. This table shows how it typically sorts out, based on the handbook’s treatment of each category.

The pattern holds up. If it threatens safety, structure or sanitation, expect it on the NOV. If it just looks old, expect the appraiser to leave it alone.

Where Does the General Rule Break?

Several situations behave differently from the basic “negotiate it” picture.

Pre-1978 homes and lead-based paint

For a home built before 1978, the presence of lead-based paint must be presumed. The appraiser has to identify where paint is defective, and Chapter 12 does not accept economic feasibility as a reason to waive a lead-based paint repair. The 1978 cutoff reflects the federal ban on lead in house paint, which HUD Exchange describes alongside the lead disclosure rule covering most pre-1978 housing. On a later-built home, paint defects are normally treated as cosmetic.

Settlement and soil problems

A settlement issue that falls short of a hazard can still produce an appraisal “subject to repair” by a licensed contractor. Step-cracks in an exterior wall are one example, and cracked flooring with significant vertical displacement is another. Minor hairline cracks from normal settlement typically do not require repair.

Wood destroying pests

A pest inspection report is an MPR for certain properties, namely those in areas of the Termite Infestation Probability Map rated “very heavy” or “moderate to heavy.” The NOV is then conditioned on the report and on any repairs it finds. Rather than guessing whether a particular area is covered, ask the lender early.

“As-is” listings

An “as-is” label does not switch off the property standards. As a matter of general practice, an as-is sale can close with VA financing only if the home already meets MPRs. If it doesn’t, someone completes the repairs regardless of the listing language. This is practice, not VA text, so treat it as the usual outcome rather than a rule.

Seller concessions and repair credits

A repair credit and a “seller concession” are not obviously the same thing, and VA limits seller concessions as a category. Whether a given repair credit counts toward that limit is a question for the lender, so raise it before writing the offer rather than after the appraisal comes back.

Refinances

An appraisal is required for purchase loans and cash-out refinances. How MPRs apply to other refinance types is outside what this article covers, and the specifics are worth confirming with a loan officer. For a purchase, the steps above apply.

What Are the Options When the Home Needs Repairs?

None is automatically right. This table lays out the tradeoffs.

The right choice depends on the buyer’s cash and how much the seller wants the sale. A buyer with limited cash to close may lean toward a price reduction or a seller-completed repair, because buyer-paid work pulls directly from out-of-pocket funds. A buyer with cash reserves and a house they love might simply pay for a modest repair and keep the contract intact.

Here’s the flip point. If the repair is large, say a failing roof or a structural problem, paying for it yourself can turn a good deal into a poor one. That’s when a price reduction or walking away is the more sensible call. If the repair is small and the house is otherwise right, paying it yourself is often cleaner than a drawn-out negotiation.

How Do Repairs Affect the Loan Itself?

Repairs paid in cash or through an escrow holdback don’t change the loan amount. A repair credit negotiated as a lower price does interact with value, because the loan is tied to the price and appraised value. The VA program allows 100% financing with no down payment when the price isn’t above the appraised value, subject to lender guidelines and full file review.

The funding fee works separately. It ranges from 1.25% to 3.3% depending on whether it’s first or subsequent use and how much is put down, and it is waived for veterans receiving compensation for a service-connected disability and other exempt groups. It can be financed. Repairs and the funding fee are different line items, so a buyer should keep them separate when planning cash to close.

Underwriting on the borrower’s side is a separate question from the property. Residual income is the controlling test, and the 41% debt-to-income figure is a guideline, not a cap. A ratio above it needs residual income well above the table. Across the wholesale programs Lendmire works with, VA sets no minimum credit score, and the lenders it places loans with start at a 580 decision score.

What a buyer should expect on timing is a longer path when repairs are involved. Repairs and re-verification add steps, and the re-verification may carry its own fee. Build slack into the contract dates rather than assuming the first appraisal is the last one.

Myths Worth Dropping

“The seller must pay for VA repairs.” VA’s handbook doesn’t say that. The circular lets the veteran pay for required repairs.

“A veteran can’t pay for the termite inspection.” That was the old rule, and the June 2022 circular changed it.

“The VA appraisal is a home inspection.” The appraisal addresses value and MPRs. A home inspection is separate and optional, though worth getting. It looks at systems the appraiser doesn’t test.

“Any peeling paint fails.” Lead-based paint is presumed only in homes built before 1978. Later paint defects are normally cosmetic.

“Cosmetic flaws must be fixed.” The handbook tells appraisers not to recommend repairs for cosmetic items, minor deferred maintenance or normal wear.

“Repairs can wait until after closing.” Only through an escrow arrangement, and the work must still be completed and funds released before VA guarantees the loan.

One caution on sources. The handbook is updated, and older copies floating around online may differ. Rely on the current VA version, and ask the lender which one it’s applying.

What Is Changing in the Rules?

VA has been looking at these standards. In December 2023 it issued an Advance Notice of Proposed Rulemaking on MPRs, described in the Federal Register, and the Congressional Research Service overview of VA home loan programs notes it. In its own announcement of the notice, VA said it was seeking public input, including on aligning MPRs with industry-wide property standards. A proposal is not a rule, so nothing here depends on it. It does mean the standards could shift, and a buyer working on a purchase should confirm current requirements with the lender.

Practical Steps for a Buyer

• Write the repair question into the contract before the appraisal is ordered.
• Ask the lender whether it accepts buyer-paid repairs and escrow holdbacks. Policies differ.
• Check the home’s construction year. Pre-1978 means lead-based paint rules apply.
• Order a separate home inspection. The appraisal won’t catch mechanical problems.
• Keep every repair invoice. The lender needs them for the file.
• Leave cushion in the contract dates for re-verification.

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 is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. VA Lenders Handbook (VAP 26-7) Chapter 12, Minimum Property Requirements, via KnowVA

2. VBA Circular 26-22-11, Pest Inspection Fees and Repair Costs

3. VA Home Loan Guaranty Buyer’s Guide

4. HUD Exchange: Lead-Based Paint Regulations

5. Federal Register: Loan Guaranty Minimum Property Requirements for VA Guaranteed and Direct Loans

6. Congressional Research Service overview of VA home loan programs

7. VA VBA announcement of the Minimum Property Requirements rulemaking notice