The appraisal is one of the most important parts of the VA home loan process, once the application itself has been approved and the borrower has the credit needed to buy a home with a VA guaranteed loan. The appraisal establishes both a fair market value for the house the borrower wants, and insures that the property meets VA minimum standards.

An appraisal is conducted within the guidelines established by the VA Lender’s Handbook, state and federal building code, and other guidelines as appropriate. The VA appraisal guidelines can’t address all conditions of a home and isn’t intended as an exhaustive list of things a house can or cannot have, all acceptable or unacceptable conditions, etc.

The VA has general guidelines for plumbing, running water, electrical systems and other vital components of the home. But in some cases, exceptions have to be made. For example, the VA requires a home to be connected to the public utility grid wherever reasonably possible. Even so, some homes use well water or have septic tanks or other “alternative” setups due to age, geographic location or other factors. The VA can and does make allowances for these depending on the nature of the individual arrangement.

A good example of this is found in a recent VA Mortgagee Letter which describes an allowance made for certain types of water “catchment” systems in the state of Hawaii.

“For properties on individual water systems, water quality must meet the requirements of the local health authority having jurisdiction to be eligible for VA home loan purposes. If the local health authority does not have specific requirements, the maximum contaminant levels established by the Environmental Protection Agency (EPA) would apply.”

The circular continues, saying that in Hawaii, “water catchment systems are not regulated by the Department of Health (DOH). DOH had a policy that water catchment systems were not safe for domestic use. After discussions with VA, DOH has determined that water catchment systems may be made safe for domestic use if certain guidelines are followed.”

That basically allows homes that meet the Department of Health requirements in such situations would be allowed to get a VA mortgage--something that might not be permitted in other states where the laws and regulations don’t approve of such water “catchment” systems.

If you are considering a purchase where there are non-traditional, alternative, or unusual features, speak to your loan officer or contact your nearest VA Regional Loan Center for assistance to see if an exception is possible, or if there are already rules in place to address the issue.