VA Loans: What is the Notice of Value?
The Department of Veterans Affairs (VA) requires all properties purchased with a VA loan to meet certain minimum requirements. These requirements are set in place to ensure Veterans are not overpaying for a property and the VA is not guaranteeing a loan for more than the home is worth.
A Notice of Value (NOV) is a document that provides a rough estimate of a property's worth based on its market value. For VA loans, this document is generated by a VA-approved appraiser and is used to determine whether the purchased property meets these minimum requirements.
The NOV provides both the lender and the borrower with essential information about the home's condition, including any repairs necessary for loan approval.
It’s important to note that a VA appraisal is not the same as a home inspection. Appraisers focus on gathering data in order to determine the value of the property. A home inspection looks at and evaluates any problems the home may currently have or possibly experience down the road so that borrowers can make informed decisions before purchasing.
VA lenders use the NOV to determine whether or not they will approve your loan request. If the home’s market value is lower than the amount you are trying to borrow, you may have difficulty getting approved or even be rejected.
The VA requires every appraisal report to be reviewed by the lender’s Staff Appraisal Reviewer (SAR) or a VA staff appraiser. The SAR is required to release the Notice of Value within five business days of receiving the appraisal report. This timeline may be extended beyond five days if more information from the appraiser is necessary.
In addition, the lender must maintain a copy of the NOV for at least 24 months after closing the loan since it is part of the loan record.
Once the NOV has been issued, the Veteran can request the VA to waive minimum property requirement (MPR) repairs as long as the following conditions are met:
If the appraisal amount comes in less than the sale price of the home, the buyer or seller may request a Reconsideration of Value (ROV). This is a secondary review by the appraiser that examines any deficiencies or inaccuracies with the initial appraisal report.
A NOV is valid for six months after being issued. Under certain circumstances, the VA may authorize an extension of the validity period and make exceptions on a case-by-case basis.
Borrowers thinking about refinancing their home at some point could need to reference their original NOV as part of the refinancing application.
For a VA Cash-Out Refinance, the appraisal process is similar to a purchase loan. Borrowers can consult with their loan officer to see if they can use their original NOV to expedite the process. However, the VA will likely require a new appraisal to verify the current fair market value that may have changed since the original NOV was issued. For VA Streamline refinancing, a Notice of Value is not required.
