A VA loan is an exclusive, lower-cost loan created to help enlisted service members and veterans of the United States military achieve their dream of homeownership. But lately, buyers wishing to purchase a home using a VA loan in this highly competitive market have seen resistance from sellers to accept their offers. This resistance stems from several misconceptions regarding VA loans, including longer closing times, paying more fees than the buyer, and more stringent inspection requirements. As a result, with a pile of offers to choose from, many sellers’ realtors advise choosing buyers using a conventional loan.
Here are some common misconceptions regarding VA loan closings, along with the facts:
- Longer closing time. The amount of paperwork required for VA loans is comparable to conventional loans, and according to the Veterans Association of Real Estate Professionals (VAREP), VA loans close two days faster on average.
- The seller pays more fees. While the VA limits the number of fees veterans pay to prevent them from being taken advantage of, that doesn’t mean there can’t be some negotiation. As long as the seller isn’t charging more than 1% of the home cost in non-allowable fees, the buyer can pay the escrow and any other non-allowable fees.
- Low loan limits. Many high-priced home sellers assume that a borrower with a VA loan can not afford their home, leaving them out of the process. However, loan limits for VA loans consistently rise year-over-year to compensate for higher-priced homes, and the 2021 loan limit is $548,250, 27% higher than the average sale price for a home in May of 2021, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. And if the home is priced higher than the limit, the borrower can add more of their down payment and qualify for a VA jumbo loan.
- VA appraisals require more fixes. Due to the VA's minimum property requirements (MPRs), VA loan appraisals may ask the seller to make more repairs to the home before it passes than other appraisals. To keep the process moving, the purchaser can pay for some or all of the fixes. However, if the fixes are extensive, the buyer may consider selecting a different property.
Brad Krzysztow, a senior loan consultant and US Army Veteran at NASB, says finding the right realtor and lender can make a big difference when getting a VA loan. “The key is finding a mortgage lender experienced in VA lending and a realtor who can help you smoothly navigate the process. Having a VA “team” on your side who understands the process and can advocate for you is vital,” says Krzysztof.
Krzysztof says there are also things you can do before you start looking to give you an edge. “The first and most important step to gain an advantage in today’s market is to get financing before you begin your home search. Keep paying your bills on time. Review your credit report for inaccuracies and clean up anything that could lower your credit score. Don’t open new credit and continue saving money for your closing costs if you decide not to use your VA loan benefit.”
Some lenders also offer programs that underwrite your loan upfront, taking you 75% through the loan process. This will make you a very appealing prospect to the seller.
If you would like to speak to an experienced VA loan expert at NASB, call 855-465-0753 or click here for more information.
