Buying or selling a historic property comes with unique challenges—especially for Veterans Affairs (VA) loan borrowers. From strict preservation rules to appraisal hurdles, heritage homes require special attention. In this FAQ-style guide, we’ll break down everything VA buyers, sellers, and real estate professionals need to know about handling historic property transactions.
1. What Makes a Property “Historic”?
A home is typically classified as historic if it’s:
- Listed on the National Register of Historic Places (NRHP).
- Located in a designated historic district.
- Recognized by state or local preservation boards.
Why It Matters for VA Loans:
VA appraisers must ensure the home meets Minimum Property Requirements (MPRs), which can be tricky if preservation rules limit modifications.
2. Can VA Loans Be Used for Historic Homes?
✅ Yes, but with conditions.
VA loans can finance historic homes, but the property must:
- Be move-in ready (no major repairs needed).
- Meet VA’s safety and livability standards.
- Not require alterations that violate preservation laws.
⚠️ Common Roadblocks:
- Outdated electrical/plumbing systems.
- Lead paint or asbestos (common in older homes).
- Restrictions on updating windows, roofs, or facades.
3. How Do VA Appraisals Work for Historic Properties?
VA appraisers assess:
✔ Structural integrity (foundation, roof, etc.).
✔ Modern functionality (working HVAC, plumbing, etc.).
✔ Preservation compliance (no illegal modifications).
Challenges:
- Appraisers may flag “deferred maintenance” (e.g., peeling paint, rotting wood).
- If the home can’t be altered due to historic rules, the VA may deny the loan.
Tip: Order a pre-inspection to identify issues before the VA appraisal.
4. What Are the Biggest Loan Hurdles for Historic Homes?
A. Renovation Restrictions
Many historic homes can’t be modernized without approval, which may conflict with VA repair requirements.
Example: If the VA mandates a new roof but local laws forbid changing the original materials, the loan could stall.
B. Higher Insurance Costs
Historic homes often require specialty insurance (e.g., “historic replacement cost” coverage), which is pricier than standard policies.
C. Limited Inventory
Few historic homes meet VA standards, so buyers may need patience (or flexibility).
5. Can VA Renovation Loans (Like the VA Rehab Loan) Be Used?
✅ Yes—but with caveats.
The VA Renovation Loan (also called a “VA rehab loan”) allows buyers to finance repairs, but:
- Renovations can’t violate historic preservation laws.
- Work must be done by VA-approved contractors.
Best for:
- Upgrading interiors (kitchens, bathrooms) if allowed.
- Fixing structural issues (foundation, wiring).
Not for:
- Altering exteriors (e.g., replacing original windows).
6. How Can Buyers/Sellers Prepare for a Smooth Transaction?
For Buyers:
🔹 Get pre-approved early to show sellers you’re serious.
🔹 Research local preservation laws to avoid surprises.
🔹 Work with a VA-savvy agent who understands historic homes.
For Sellers:
🔹 Disclose all preservation restrictions upfront.
🔹 Make minor repairs (e.g., fix leaks, repaint) to pass VA appraisal.
🔹 Price competitively—historic homes can take longer to sell.
For Agents & TCs:
🔹 Coordinate early with appraisers and title companies.
🔹 Educate clients about VA loan limitations.
🔹 Keep preservation permits/documentation handy.
7. Are There Tax Benefits for Historic Home Buyers?
Possibly! Some states/cities offer:
- Tax credits for restoring historic properties.
- Grants or low-interest loans for preservation work.
- Property tax freezes to discourage over-modernization.
Check with:
- Your state’s historic preservation office.
- A CPA familiar with historic property tax incentives.
8. What If the VA Denies the Loan Due to Historic Status?
Options:
- Appeal the decision (if the appraisal missed key details).
- Request a waiver (rare, but possible for minor issues).
- Switch loan programs (e.g., FHA 203(k) or conventional rehab loans).
- Ask the seller to make repairs (if allowed by preservation laws).
Final Thoughts
Historic homes have charm and character, but VA loan rules add extra layers of complexity. The key to success? Preparation, patience, and working with experienced professionals who understand both VA guidelines and preservation requirements.
