Home sellers, weary of the VA appraisal process, can be steered away from VA borrowers in some parts of the country, making it difficult for qualified veterans to use their hard-earned home loan benefits.
Some sellers and agents think they can find better-qualified borrowers than those with VA loans. Others are happy to help veterans but worry that the VA loan process will be filled with delays and red tape.
Unfortunately, lingering misconceptions about VA loans keep sellers and agents alike from giving military homebuyers a fair shake.
The simple reality is this long-cherished home loan program presents new opportunities for both and expands the pool of potential purchasers to include a demographic that’s long led the nation in homeownership rates.
Sellers in some parts of the country are starting to regain their footing. Home prices are rising and the housing market is heating up. After a few years of easy pickings, some homebuyers are again facing bidding wars with competing offers beyond the asking price. As sellers get choosier, some most certainly decide to exclude VA financing from the types they’ll accept.
Sometimes it’s a seller’s concern about paperwork or slow-moving bureaucracy. Other times it’s an agent’s warnings about the VA appraisal process or closing costs. But many times the fears don’t match up with facts on the ground.
Let’s look at a few common culprits:
Most VA loans close in 30 to 45 days. This isn’t what some agents may remember as the VA loan program of yesteryear, with everything done via snail mail. In fact, as of November 2017, the average time to close for all loans averages at 43 days. There aren’t mountains of red tape.
The VA appraisal process is two-pronged and involves both the valuation and a broad assessment of certain property conditions, known as the Minimum Property Requirements, or MPRs. On average VA appraisals are coming back in just under 10 days nationwide, although the wait may be longer in more remote parts of the country.
True, the MPRs can absolutely pose a hurdle if the property is a fixer-upper or is in need of repair. In those cases, it may not make a lot of sense to consider VA financing; the FHA 203k program may be an alternative. This is an area where a listing agent who knows the VA program can make a big difference.
The VA’s no-down payment benefit has helped millions of veterans secure home financing since World War II. But that incredible opportunity doesn’t mean lenders just give away these loans. VA borrowers still need to meet credit, debt and income requirements. In fact, no other loan product on the market, including prime loans, has had a lower foreclosure rate over the last decade.
In addition, the closing success rate for VA loans is nearly the same as for conventional loans, according to Ellie Mae data.
Loan preapproval isn’t a guarantee no matter the loan type, but VA borrowers as a group aren’t a risky proposition.
The VA does limit what closing costs veterans can pay. But sellers are not required to pay any closing costs on behalf of a VA buyer. That includes so-called “non-allowable” fees that veterans aren’t allowed to pay. Sellers commonly pay them, but they’re not required to do so.
Borrowers in competitive markets will undoubtedly hear from a real estate agent or a lender that they may need to come to the closing table prepared to cover some expenses. The average VA purchase loan last year was about $261,000, so don’t assume a military borrower won’t be able to put some skin in the game if necessary.
Home sellers hold all the cards when it comes to deciding from whom they’ll entertain purchase offers. They’re under no obligation to open the door for prospective VA borrowers. But it certainly makes sense on a few fronts:
Please don’t let institutional myths and misconceptions keep you from giving veterans, active service members and military families a fair shot at the dream of homeownership. If you have any questions about VA loans, don’t hesitate to reach us night or day at 855-524-7279 or start your journey online today.