Deciphering the VA Lender’s Handbook Chapter 11 Part 8
In the last article we started talking about special things to look for in the appraisal process for non-conventional homes and home loans. We covered manufactured homes and farm residences, as well as refinances with cash out for improvements to the home. In this article, we’re going to talk about properties subject to flooding, properties in the coastal barrier area, and properties in close proximity to an airport.
So, as you’re looking to buy a home, you’ll want to consider whether it is in a Special Flood Hazard Area (SFHA) as designated by the Federal Emergency Management Agency (FEMA). An SFHA is an area inside a 100-year floodplain. You can find FEMA flood maps online. If the home is in an SFHA, it might not be eligible for VA funding. Also, if there is an indication that the home is subject to regular flooding, even if it’s not located within an SFHA, the home will not meet VA’s minimum property requirements. This sort of thing can be tricky and hard to predict, but it usually pays off to do your homework on the house you’re looking at before the VA appraisal. Now, just being on a flood map will not immediately disqualify a home; if the home is an existing construction, it may still be eligible for a VA guaranty. Also, in many cases, the home can be approved by you will be required to purchase flood insurance.
Now, SFHAs are different from CBRSs. CBRS stands for Coastal Barrier Resources System. Homes located in a CBRS are not eligible for VA loans, and there aren’t really any exceptions to that rule. Granted, this is only a concern in a few areas of the country. Namely, the Great Lakes area, the Gulf Coast, Puerto Rico, the Virgin Islands, and the Atlantic coast. Obviously, only the homes in very close proximity to those large bodies of water will be in the CBRS, but that would be a really good thing to check before you start the VA loan application process. You can check the CBRS maps online at the U.S. Fish and Wildlife Service website. The prohibited areas on the map are inside the heavy black lines. If you’re looking at a home inside a CBRS, you’re best bet is to find a different home that is not inside one.
You might wonder why a home’s proximity to an airport might be a problem, but there are two potential issues involved with a home being close to an airport. The first one is noise and the second is safety. The VA uses a Noise Zone table to determine what noise zone the house is in. Nowhere in this section does the Handbook say that being in a certain noise zone will disqualify a property, but it will certainly have bearing on the fair value of the home. Here is the table:
|Noise Zone||CNR (Composite Noise Rating)||NEF (Noise Exposure Forecast)||DNL (Day/Night Average Sound Level)|
|1||Under 100 db||Under 30 db||Under 65 db|
|2||100-115 db||30-40 db||65-75 db|
|3||Over 115 db||Over 40 db||Over 75 db|
As for safety, there are three zones that a home might fall into: a Clear zone, which, despite the name, is the worst place a home can be and is the area immediately at the end of the runway, and an Accident Potential zone, which are farther away than the Clear zone but still have a significant risk of accident. The third zone is not special enough to have a name and is anywhere other than the first two zones. Now, when proximity to an airport is a consideration in an appraisal, there are a number of requirements that might come into play depending on where the home is located. The Handbook provides a very helpful chart to show you what you might expect. The first table shows the five zones the home might be in, along with notations of what requirements will be in effect, and the second table explains what those requirements are. First table:
|Type Construction||Noise Zone One||Noise Zone Two||Noise Zone Three||Clear Zone||Accident Potential Zone|
|Proposed||A||A, B, C, D||E||F||A, C, H, I|
|New/Existing||A||A, D||A, D||A, C, G||A, C, I|
|A||The fee appraiser’s market data analysis must include a consideration of the effect on value, if any, of the property being located near an airport.|
|B||Sound attenuation features must be built into the dwelling to brin the interior DNL of the living unit to 45 decibels or less.|
|C||Available comparable sales must indicate market acceptance of the subdivision in which the property is located.|
|D||The veteran must sign a statement which indicated his/her awareness that the property being purchased is located in an area near an airport, and that aircraft noise may affect livability, value, and marketability of the property.|
|E||Not acceptable as the security for a VA loan unless the project was accepted by VA before noise zone three contours were changed to include it. In that situation, the requirements for proposed construction in noise zone two must be met.|
|F||Not acceptable as the security for a VA loan.|
|G||The veteran must sign a statement which indicates his/her awareness that the property being purchased is located near the end of an airport runway, and that this may have an affect upon livability, safety, value, and marketability of the property.|
|H||The project in which the properties are located must be consistent with the recommendations found in the airport’s Air Installation Compatible Use Zone (AICUZ) report.|
|I||The veteran must sign a statement which indicates his/her awareness that the property being purchased is located in an accident potential zone and that this may have an affect upon livability, safety, value, and marketability of the property.|