Deciphering the VA Lender’s Handbook Chapter 13 Part 9
So you’ve been working with a lender to get a VA loan, and you got the appraisal report back and everything’s great. Then, you happen to hear of a different lender that’s willing to offer you better terms. You follow the lead and it turns out that it’s true – the new lender can really offer you better terms than the old one. What can you do? Are you allowed to abandon your current lender mid-way through the loan application process? In case of VA loans, the answer is yes. You are allowed to jump ship and go with a different lender, even if the appraisal report has already been received from the appraiser. However, as with everything else in the VA loan program, there are some guidelines and restrictions on how this can be done and what the new lender can reuse from the old lender. Since Chapter 13 of the Handbook is talking about appraisal reports, that is what we’re going to cover in this article. If you have questions about other considerations when transferring to a new lender, it’s best to ask the loan officer you would like to be your new lender.
The VA expects both of the lenders to cooperate when a veteran chooses to work with a new lender after the original lender has ordered and received the appraisal. For the most part, you shouldn’t have to be involved with ensuring any cooperation beyond providing contact information; they should generally be able to work everything out without too much direct involvement from you. Now, you should know that if your existing lender has issued a NOV (Notice of Value), the new lender may not be able to use it – it depends if the old lender is a member of LAPP (Lender Appraisal Processing Program) or not. If the old lender is a member of LAPP, the new lender will not be able to use their NOV. This is because a LAPP lender uses an on-staff reviewer to review the appraisal and issue a NOV. If the VA issued the NOV, then the new lender should be able to use. Conversely, if the new lender is LAPP, they are able to review the appraisal and issue an NOV as if they had ordered the appraisal.
In the event that an NOV has not yet been issued by the old lender, and the new lender is not a member of LAPP, then all of the appraisal documentation must be submitted to the VA and they will review the appraisal and issue an NOV to the new lender. If the VA has already submitted an NOV to the old lender, the new lender can use the same NOV without having to have it processed again. If, for whatever reason, the new lender is not able to get a copy of the original appraisal report and all addenda (which includes the pictures of the property), then the lender may contact the appraiser who performed the appraisal on the property to get another copy. Important note – the appraiser is allowed to charge a fee for this service, and you are allowed to pay for it, so it may very well show up in your closing costs or be charged to you upfront.
A problem that might come up is the validity period on an NOV that has already been issued. NOVs are only valid for a certain amount of time (6 months in most cases), and if you’re switching lenders after the NOV has already been issued, and are able to use the same NOV, you might end up getting uncomfortably close to the end of the validity period. This won’t usually be a problem, since your new lender will be aware of the validity period and will work to get things done in time. Worst case scenario, the new lender submits a request to the VA to extend the validity period, using the fact that the lender switched mid-process as justification. Chances are the VA will approve the request. Switching lenders isn’t the only thing that might affect the length of the validity period.
Even if you aren’t switching lenders, there are other things that can make it difficult to close on your loan within the validity period – such as a natural disaster. In the event of a natural disaster, however, the VA office in the affected areas will send out instructions to all VA-approved lenders regarding how to handle cases where the NOV has already been issued.