What is the purpose of the Certificate of Reasonable Value?

The Certificate of Reasonable Value (CRV) serves as an important document in the context of property financing, particularly for VA loans. Its primary purpose is to establish the appraised value of a property, which has a direct correlation to its sales price. This appraisal determines the maximum amount the Department of Veterans Affairs will back on a loan for that specific property. By providing an objective value, the CRV ensures that the lender and the borrower are aware of the property's worth, enabling informed financial decisions. Thus, the CRV aids in protecting both the borrower and the lender by aligning the loan amount with the property's actual market value.

This contrasts with the other options, which do not accurately represent the function of the CRV. For instance, outlining the terms of a mortgage pertains to the loan agreement itself, rather than an appraisal or value assessment. Securing a loan with collateral refers to the general concept of using property as security, which is not directly the role of the CRV. Lastly, providing an insurance policy on the property is unrelated to the CRV's purpose, as insurance is a separate matter focused on risk management rather than property valuation.