Deciphering the VA Lender’s Handbook Chapter 14 Part 9
As mentioned in previous articles, the required construction inspections and construction exhibits are determined on a case-by-case basis for existing homes that are to be altered, improved, or repaired with a VA cash-out refinance. In this article, we’re going to cover two situations that might come up and how the VA handles them. This article will give you the first steps you need to take if either of these situations come up. The two situations we’re going to cover are when the installation of appliances or finished floor coverings needs to be delayed, and when changes to the construction exhibits need to be made after the appraisal but before loan closing.
For the most part, installation of appliances and floor coverings can be delayed until just prior to the closing of the loan, but there are two exceptions: bathroom floor covering and wood finish flooring. The Handbook does not explain why those two-floor coverings cannot be delayed, but even for appliances and floor types that can be delayed, there are conditions. In order to be delayed, the third-stage inspection report (the one that takes place once all construction has been completed) must have a description in Section 1 of
- all appliances and finish floor covering to be installed as identified in the specifications, for example, carpet manufacturer’s name and carpet quality code number, and
- the living area(s) involved, if not obvious
Also, the inspector must check two boxes in Section 6 of the inspection report: the “Prefinal Report Approved” box and the “Certification is required that lender’s inspection prior to loan closing reveals satisfactory installation of specified appliances and finish floor covering as described in Item 1 in the area(s) identified in Item 1.” The VA does not require that an updated Notice of Value be furnished; the existing Value Notice will still suffice. However, the same is not necessarily true of our second situation: changing the construction exhibits after an appraisal.
When changes need to be made to the construction exhibits, what needs to be done depends on whether there is a veteran under contract on the loan. Since we’re talking to veterans in these articles, we won’t be covering what needs to happen when a veteran is not under contract and the exhibits need to be changed. If you are looking for that information, go ahead and read Chapter 14 of the VA Lender’s Handbook. So, when you need to have a change made to the construction exhibits, you the veteran must make a written request to do so. Your lender can help you write and submit this request. The request must be made using VA Form 26-1844, Request for Acceptance of Changes in Approved Drawings and Specifications, then submitted to the local VA office of jurisdiction.
There is one exception to that rule – if the property was inspected by the Department of Housing and Urban Development (HUD), and the changes being made to the construction exhibits are clearly described on the HUD inspection report, you the purchaser have signed off on the changes, and the changes are minor, don’t add any cost to you, and won’t really have any effect on the fair market value of the property. Common examples of things that fit into this exception are things like changing the location of electrical outlets or windows, or choosing a different water heater, furnace, hardware, or bath fixtures.
If the changes will not affect the property value, the change request goes to the inspector. When the inspector receives the request for a change in the construction exhibits, they confirm the information on the VA Form, inspect the property according to the plans, specifications, and change order, signs the change order in the appropriate space on the form, gives the builder (or you) the original counter-signed change order to forward to the lender, and will retain a copy. If the change will affect the value of the property, the request must go directly to the VA. The VA staff must approve the changes and will issue an amended Notice of Value (NOV). The amended NOV will be mailed directly to you and gives the lender instructions on how to obtain it.