Wednesday, April 17, 2019 / by Elizabeth Sorensen
Many sellers would love to help veterans use their hard-earned home loan benefits but they may be wary of the VA appraisal process and have been misinformed by well-meaning agents that they can find better-qualified borrowers than those with VA financing.
Unfortunately, long-held misconceptions regarding VA home buyers has prevented not only home sellers, but real estate agents from giving well-qualified military buyers a fair shake.
The reality is that this long-cherished home loan program has many benefits to buyers AND sellers. Accepting VA loans will greatly expand your buyer pool and include a demographic that has long led our country in home ownership rates. In 2018 alone, over 600,000 veterans became homeowners using a VA loan. For the veteran, there are many benefits- no down payment, no mortgage insurance, and access to lower mortgage rates than other loan types.
With the hot sellers market we have been in for over two years now, rising home prices, and multiple offer situations becoming the norm, sellers are getting pickier and often decide to eliminate VA buyers from the running. They may hold the belief that VA financing is fraught with red-tape and bureaucracy, which will result in a long, drawn-out transaction filled with one delay after another or they have fears about expensive closing costs. Often these fears stem from well-meaning agents’ warnings, but in actuality they don’t line up with the “boots on the ground”.
Let’s take a look at some of the most common misconceptions surrounding VA loans.
Myth #1- VA Loans Are a Long, Arduous Process
Historically, VA loans have a reputation for being a long, nail-biting process. In reality, with modern streamlined processes in place the average VA loan closes in 30-45 day, which is very similar to other loan types. With a great lender and real estate agent guiding the buyer through the process, a VA loan can close in less than 30 days and even in 21 days or less. This number may shock you, but the lenders I partner with can close in under 30 days.
Myth #2 VA Appraisals Take FOREVER
This is where having a great, local lender makes all the difference. Working with an experienced lender who thoroughly understands the VA process is critical. The facts are that VA loans have an average 10 day turn-around nationwide. More remote areas may take longer of course.
VA appraisals definitely have a bad rap, but when you understand what the appraiser is trying to accomplish it demystifies it. A VA appraiser is basically looking for two things. First, the appraiser is going to establish the market value. Second, he/she will be evaluating a broad assessment of certain property conditions called the “Minimum Property Requirements” or “MPRs.” These are mostly requirements related to health or safety concerns or other items that pose a risk to the veteran.
If your home is a fixer-upper or is in need of repair, these MPRs may pose a problem in securing VA financing. This is an area where choosing a listing agent who truly understands the VA program can make a huge difference.
Myth #3 VA Buyers Are Not Qualified
The VA loan program has helped over 20 million veterans since World War II to fulfill their dreams of homeownership. Although this is an incredible opportunity to purchase a home with zero down, it does NOT mean that lenders just give away these loans. Veterans still have to meet credit, income and debt requirements. In fact, over the last decade, no other loan product has had a lower foreclosure rate, including prime loans, than VA loans.
According to Ellie Mae data, closing success rate for VA loans is nearly the same as conventional loans. There is no guarantee with any loan pre-approval, but as a whole VA borrowers are not a risky population of home buyers.
Myth #4 VA Loans Are Expensive to the Seller
While the VA does have certain limits on what costs the Veteran is allowed to pay, the seller is not required to pay them. In fact, the seller is not required to pay any closing costs on behalf of the buyer. Although, sellers often pay some or all of the veteran’s closing costs, this is all negotiable at the time of offer negotiations. The average purchase price for a VA loan last year was $264,197. This is proof that many military home purchasers have the ability to put some “skin in the game” if necessary.
Casting a Wide Net = Higher Purchase Price
Home sellers obviously have the choice when it comes to which loan types they will accept when presented with offers for their home. While they are not obligated to entertain those from VA buyers, it certainly makes sense to do so. When selling your home, you want to cast the net as wide as possible to increase the demand for your home. VA buyers now account for at least 10% of the buyer pool. The higher the demand- the higher the potential sales price.
The VA program is booming and it is growing every year. This demographic is hungry for homeownership and often find it difficult to qualify for more traditional types of financing. Many just want to take advantage of the zero-down and other hard-earned benefits this program offers them as a veteran.
An Opportunity To Serve Those Who Have Served You
Last, but certainly not least, VA borrowers have proudly served our country and have made great sacrifices that many of us aren’t even aware of. The least sellers can do, as those whom have been served, is to give these men and women the opportunity to make a strong offer to purchase their home.
Thank you so much for reading this article. If you have any other questions regarding VA loans or buying/selling, I’d love to hear from you!
Elizabeth Sorensen (509) 844-6539