Introduction
A Certificate of Reasonable Value (CRV) is an official document issued by the Veterans Administration (VA) following an approved property appraisal. The primary purpose of the CRV is to set the maximum limit on the principal amount of a VA-guaranteed mortgage loan. This provides assurance to both veterans and lenders that the property’s value justifies the loan amount being requested.
Examples of Certificates of Reasonable Value
Example 1: Purchasing a New Home
A veteran looking to purchase a new home submits a purchase contract to the VA. The VA arranges for a property appraisal. Suppose the appraisal confirms that the property’s market value is equal to the contracted price of $300,000. In this case, the VA issues a CRV that matches the purchase price, thereby guaranteeing a VA loan up to $300,000.
Example 2: Refinance Loan
A property owner who is a veteran decides to refinance their current mortgage loan. The VA performs an appraisal, and the CRV reflects a property value of $200,000. The homeowner can then obtain a refinancing loan with a VA guarantee up to the appraised value.
Frequently Asked Questions
What is the role of the CRV in a VA home loan?
The CRV serves as the VA’s statement of the property’s reasonable value, capping the maximum amount for which the VA will guarantee a loan.
How is the CRV value determined?
The CRV value is determined through an appraisal conducted by a VA-approved appraiser, who assesses the property’s market value based on comparable sales and other relevant factors.
Can the CRV differ from the purchase price?
Yes, the CRV can differ from the purchase price. If the CRV is lower than the contracted sale price, the buyer may need to negotiate a lower price or pay the difference out of pocket.
How long is a CRV valid?
A CRV typically remains valid for six months for existing homes and 12 months for new constructions. This validity can vary based on specific circumstances.
What happens if the requested loan amount exceeds the CRV?
If the requested loan amount exceeds the CRV, the veteran borrower would be responsible for paying the difference between the CRV and the purchase price unless renegotiated with the seller.
Related Terms
Veterans Administration (VA)
A federal agency primarily responsible for providing essential services, benefits, and support to veterans, including VA home loan guarantees.
Appraisal
An assessment provided by a certified appraiser estimating the market value of a property, crucial for both buyers and lenders to make informed decisions.
VA Loan
A mortgage loan program established by the Department of Veterans Affairs to help veterans, service members, and eligible surviving spouses become homeowners with favorable terms including zero down payment and lower interest rates.
Online References
Suggested Books for Further Studies
- “Your Complete Guide to the VA Home Loan” by VA Loan Benefits Team
- “The Veteran’s Guide to Home Buying” by Brian Reese and Ashley Rojo
- “VA Loan Success: How to Take Full Advantage of the VA Loan Program” by Grant Moon
Fundamentals of Certificate of Reasonable Value (CRV): Real Estate Basics Quiz
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