Buying an Older Home With a VA Loan

Many of the Veteran’s buying a house in North Carolina want to use their VA Home Loan benefits to buy a house that’s a little further out, has some land and in some cases is “older.”  The VA does not have a restriction on the actual age of a home they will ensure with a VA Loan.  So, buying an older home with a VA Loan is very acceptable.

There are some minimum property requirements that you will need to look through, and the home must meet the local and NC State building codes (which is expected).  You’ll also want to check the structure to be sure that the components have an adequate “remaining economic life.”

The Veteran’s administration is not going to make a loan on a house where the roof (for instance) will need to be replaced next month.  They also don’t want to make a loan where the property is about to included in an area that is obviously turning Commercial, or a neighborhood that has poor construction and extremely high foreclosure rates.

VA loan rules don’t specifically reference the age of a home in terms of whether it would be acceptable for a VA mortgage or not. Instead, the real issue is whether it meets VA minimum property requirements, state and/or local building codes, and whether the property has what’s known as “remaining economic life”.

If you are looking for a home that is older, and you want to know more about the Minimum Property Standards for a VA Loan, review the major points a VA appraiser will review:

• The VA Home Loan program is for an Owner Occupied property – not Commercial.  So, if the home is designed for non-residential use (for a day care, or dog grooming service for instance) that portion of the property can not represent more than 25%.
• The electrical systems and plumbing must be in good repair, and have usable life remaining.  Tube wiring of an old house probably won’t pass code – which means it won’t pass a VA Home Loan Appraisal either.
• The home must not include functional obsolescence of the cooking, living and sleeping area... so, the Veteran that called and wanted to buy a house where the “outhouse” was REALLY outside – would not be able to get a VA loan.  The kitchen, bathrooms and sleeping areas should all be accessible with out going outside.
• Heating for a home that only includes wood burning stoves must have a back up “regular” heating system that will hold at the 50 degree mark.  We know that old houses are neat – but keep in mind that if you run into a problem and can’t make the payments, the VA has to sell that house!
• The roof needs to be in good condition, no major leaks.  If the roof has 3 layers of shingles on top of one another – you can’t just add a 4th layer.  They will need to come off.  Generally speaking a roof should have at least 3 years left on it to get a VA Loan.
• The Sewage System has to work, and the well water must run in the house.  The hot water heater must work – and again, these are things that code for every county in NC requires.  So it’s not just a VA Mortgage Loan requirement.
• If a Community or City water / sewer system is available – you will need to connect, unless the cost to connect is cost prohibitive.  If this is an issue – call us, and we’ll do the math to see if you have to pay that assessment to get a VA Loan.
• Access to the Property is required – we just had a Veteran who bought a 3000 house in Reidsville.  To get to the house, he had to drive down a little dirt road on somebody else’s property.  We could not make him a loan until there was a private road agreement, giving him the right to cross through the property, and detailed how that road was going to be maintained.
• Notable Foundation problems, especially on older homes will likely need to be fixed.  If part of the front porch is lower than another part – and you can see that when you get out of the car – just know that you will not be able to close on your VA Loan until that’s fixed.
• Ditto for notable moisture in a basement, or pooling water in the crawl space.  Last summer we had a termite report that showed a 33% moisture level in a crawl space (after one of those big rains in Johnston County), and we had to send the VA Inspector out to say that a moisture barrier was or wasn’t needed.
• The home must be built so that water doesn’t pool next to the foundation and under the house.  This is another one of those local code requirements, but we did have a house a couple of years ago that had to be regarded before the VA Loan could be made.
• Termite reports are required, so if there’s a notation of Fungus, Dry rot, excessive moisture levels or termites – it must be treated and inspected to say that there’s no structural damage because of the “damage” no matter how minor it is.  Most underwriters require the inspection be done by a VA Inspector – or a Licensed Contractor.  If you suspect this is going to be an issue – talk to us early in the process, and we will find out what the VA Loan Underwriter will require.
• No lead based paint (period).  This can be painful if there are multiple out buildings.  NONE of the structures on the property can have lead paint, so even if you are just using that shed for the lawn mower – the VA Appraiser might make you paint it.

Un-Permitted Space

VA MPRs (Minimum Property Requirements) also include a clause that says that the property can’t have any conditions that would impair sanitation, structural soundness or safety of the home.  VA Appraisers could require additional steps out of the back of the house, if it’s awkward, and looks like someone is going to fall. This is not something we see very often, but occasionally we’ve seen questions from the VA Appraiser, particularly if the space was not properly inspected by the County.  For instance the Basement was finished by the homeowner after he bought the house, but didn’t pull a permit.

Space that hasn’t been permitted will NOT be given as much value as space that HAS been permitted.  This could result in a low Appraised value for the home.

There are many historic homes that are very old, yet well maintained and an important part of the communities they are in.  The VA Home Loan would not be difficult for a Veteran to get in that situation – however – a home that has MAJOR need of repair, doesn’t have all of it’s appliances, has the heating system ripped out – probably won’t work for a VA Loan.  Unfortunately, many of the short sale homes on the market do have significant “deferred” maintenance.  Many of the foreclosed homes that a Veteran wants to buy has the same issues.

The VA Loan is great for older homes, and homes in a more Rural Area – especially if most of the changes that need to be made are cosmetic.  However, the VA Mortgage program is not designed for “construction” projects.  The VA Loan does not require a down payment – but they will not loan you extra money to fix all of the plumbing (for instance).

If you have more questions about buying an older home with a VA Loan in North Carolina  – please call Steve and Eleanor Thorne 919-649-5058, or leave us a comment below.  We love helping Veteran’s, we appreciate your service, and we work with folks all over NC everyday!