Veterans Affairs (VA) home loans have experienced tremendous growth in recent years. The VA expects to guarantee more than 620,000 home loans in 2013, which would be the agency’s most successful year on record.

But real estate agents need to know that the VA home loan program is unique. It’s quirky. A failure to understand that quirkiness can waste a lot of time and resources.

Only certain types of properties can be financed with VA loans, and each home must meet the VA’s “minimum property requirements.” Familiarity with the VA’s property criteria leads to a focused house hunt and a quick close.

In that spirit, let’s take a look at five things real estate agents must know about the VA loan program:

Fixer-Uppers Not Allowed

Has your buyer fallen for a fixer-upper? Then a VA loan isn’t your best bet.

Here’s why: VA loans are designed to fund move-in ready homes in good condition. The VA appraisal will ensure that homes are:

• Safe
• Structurally sound
• Sanitary

So what qualifies as “safe, structurally sound and sanitary”? The VA’s Minimum Property Requirements (MPRs) outline basic criteria that will be measured by the VA appraiser.

MPRs are not intended to be impossibly rigid or unrealistic. “Each unit must have electricity for lighting and for necessary equipment … Heating must be adequate for healthful and comfortable living conditions,” etc. Makes sense, right?

But that doesn’t mean any standing structure will meet VA criteria. A home with sagging ceilings, a deteriorating foundation or termite-ridden floors simply won’t make it through escrow with a VA loan, unless major repairs are completed by the seller.

(Photo courtesy of Flickr user John Picken – used under Creative Commons license)

Farm Land Not Allowed

The creators of the VA loan program wanted to make it easier for service members to own their primary residences.

As such, VA loans can’t be used to purchase farm land or a vacant lot with the plan to build “someday.”

It is technically possible to purchase an undeveloped lot in conjunction with a VA construction loan. But as most VA lenders are shying away from construction loans these days, it’s much easier to purchase an existing property with a VA loan.

Proper Water Drainage is a Must

When uncontrolled, water can be a home’s worst enemy. Water encourages wood to rot, mold to grow and foundations to crumble.

So rest assured: The VA appraiser will definitely vet a home for water damage. Gutters must be present and in good shape, lots must be graded to drain water away from the home, and basements/crawl spaces must be mostly dry.

Roof Must Be in Good Condition.

While we’re on the subject of water damage, let’s address one of a home’s primary defenses against moisture: the roof.

The VA requires roofs to:

• Prevent entrance of moisture.
• Provide reasonable future utility, durability, and economy of maintenance.

The VA gives its appraisers freedom to make a roofing-quality judgment call, but they generally want a roof to have at least five years of life remaining.

Keep in mind that the VA’s roofing standards really aren’t that different from any other loan program. FHA loans employ a similar standard, and many conventional lenders also require roofs to be in good condition.

(Photo courtesy of Flickr user Bryan Pinzgauer – used under Creative Commons license)

Major Systems Must Have “Reasonable Future Utility”

“I’m an appraiser, not a plumber/electrician/HVAC expert.” –Common appraiser adage

The VA appraiser is not required to check every pipe or test every outlet in a home. Rather, the VA appraiser performs a basic review of a home’s major systems, with an eye on safety hazards or imminent system failure.

Major systems need to meet applicable building codes and have “reasonable future utility.” System glitches that could make a home subject to repair include:

• Outlets that fail to meet local code.
• Overloaded fuse boxes.
• Heating systems that can’t keep areas with plumbing at least 50 degrees Fahrenheit.
• Plumbing leaks.
• Exposed wiring.

More complex cases may prompt the VA appraiser to request a professional inspection. Any repairs necessary to bring the home up to VA standards must be completed before the loan can move forward.

Put the Facts to Good Use

Have a solid understanding of VA loans? Put that knowledge to work for you and your military clients on your next house hunt. Familiarity with VA appraisal standards will lead to a more focused and effective home search, which our military homebuyers certainly deserve.

And that’s a fact.

This guest post was written by Jessi Hall, a former real estate broker and investment property manager. She currently writes about real estate, VA loans and homeownership for Veterans United Home Loans. Follow Jessi on Google+ and the Veterans United Realty blog.