My buyer has a VA home loan: is it good or bad?
Your house is on the market and you receive an offer. Hooray! But your potential buyer has planned a VA loan. Should we be worried?
The short answer is no. “It is true that VA loans were once more difficult to close, but that is ancient history. Today, you are likely to have much the same problems with a buyer. who has this type of mortgage than another And flexible VA guidelines may be the only reason your buyer can buy your home.
Find VA and Other Home Loan Rates (Jul 16, 2021)
What Are VA Loans?
If you’re not close to the military, you might not even know what a VA loan is. The VA home loan is an earned benefit for the military and veterans alike. It allows buyers to finance homes without down payment or mortgage insurance.
VA mortgages are attractive to mortgage lenders because the loans are guaranteed by the federal government. The lender will not lose money if the buyer defaults.
These are arguably the best mortgages for borrowers. Mortgage data tracker Ellie Mae reports nationwide mortgage statistics. And, in his Origination Insight report from November 2018 (the latest available to date), he found that VA loans had the lowest mortgage rates. Yes, even with no down payment required, VA borrowers have paid lower rates than FHA and conventional borrowers.
But what are they like for sellers?
Broken Myth: VA Loans Don’t Close More Often
The myth is that deals involving VA home loans are less likely to get closed than others. Supposedly, there are so many slips between the offer and the close that many trades fail.
But this is simply not true. In this report by Ellie Mae from November 2018, VA loans ended slightly After frequently than average.
You can make sure your buyer is serious and qualified by requiring a mortgage pre-approval letter (not pre-qualification) before accepting an offer.
The reality: the numbers
For all purchases, according to Ellie Mae, 74.3% of VA loans were closed, compared to 74.1% of all mortgages. Conventional (non-government did a bit better than VA, with a 75.2% close rate.
In short, VA mortgages will close at a high rate and are less likely than the average loan to not close.
Broken myth: it takes forever for VA loans to close
This myth concerns the time between the offer and the closing. Some people think the VA bureaucracy works ridiculously slowly.
And, as with some of these myths, there may have been a time when this was true. But that’s in the past. In most cases, the lender is allowed to make the underwriting decisions, fund the loan, and then send it to the VA for insurance.
Your lender matters
Some lenders have what is called an “unsupervised automatic authority” to complete VA loans from start to finish. They can usually close faster because they don’t have to kick your loan to make decisions. They may be referred to as “delegated” or “direct” VA lenders.
Other lenders do not have the power to take out loans themselves. Usually, they haven’t made enough VA home loans or don’t have high enough equity to be delegated. In this case, decisions may take longer because they have to go through the VA Home Loan Center.
For proof, we can still turn to Ellie Mae’s report. He reveals that he Is take longer to complete a VA loan. But only two more days on average.
In November 2018, it took an average of 50 days to close one VA loan and 48 for all others.
Broken myth: VA ratings are low and slow
The people who come forward to establish property values are home appraisers. They are not VA home appraisers. Chances are they are appraising all kinds of mortgages.
And they won’t (or certainly shouldn’t) undervalue your home just because your buyer has a VA loan. The fair market value of your property is its fair market value, regardless of the mortgage.
Reality: no longer slow
There was a time when some appraisers gave VA loans a low priority. This was because they were being paid less for these loans than for other types of mortgages.
But then the VA increased its fees. Thus, appraisers now tend to prioritize all loans equally.
This may partly explain why the ratings have become perceived as low. Couldn’t you feel cranky and ungenerous if you were paid less than the going rate for your job?
VA MPR Rating (Minimum Ownership Requirements)
When your appraiser shows up, he or she will have a longer checklist than for non-VA loans. This is because the VA sets minimum standards for the homes that its borrowers buy.
The objective of these PRMs is to help veterans and military personnel avoid places that are dangerous, unliveable or dangerous to their health.
As long as your home is three S-compliant (safe, structurally sound, and sanitary), you should have few problems. And, if you have it prepared so that it is ready to move in, you will probably have even less.
Broken Myth: You’ll Have To Pay All Closing Costs If Your Buyer Has A VA Loan
You don’t have to pay anyone’s closing costs, whether or not your buyer has a VA loan. And the only exception to that is if that buyer has a VA loan and shows up at the negotiating table with their service M4 rifle.
Seriously, the type of mortgage loan shouldn’t have any impact on your negotiations. Both parties want the best possible deal.
Sources of the myth
Okay, maybe it’s true that those with VA loans are more likely to ask you to cover some or all of their closing costs. This happens for two main reasons:
- They may have limited financial resources – because they don’t have to make a down payment, they can buy cheaply. Indeed, some can buy without making direct payments
- The VA prohibits its candidates from paying certain closing costs (tax costs, courier / postage costs, application costs, etc.)
- AV allows sellers pay up to 4 percent of buyer’s costs if they choose to do so, for example, instead of lowering the price. But most programs To allow vendor concessions, and none of them require you have to pay these
It doesn’t matter whether you choose to pay the buyer’s fees or lower your price by the same amount in negotiations. but it might be easier for buyers to close the deal if you can cover some or all of their costs. And, if you live in one of those areas where sellers traditionally pay buyer’s closing costs, that’s not even a problem.
You do not to have do anything. So be creative. Just negotiate the best possible deal. And, if that’s not enough, walk away.
Some sellers are skeptical of a loan that sounds too good to be true – a 100% loan. But it is a deserved benefit for those who serve our country. In 2018, a skeptic wrote on a forum:
“A few days ago we received an offer on our house from a VA loan buyer. Not knowing much about these types of loans, the offer seemed… suspicious. We were offered $ 1,000 below asking price with a request for $ 10,000 in closing costs. We were told they would only put in $ 1,000.
“Okay, I read a lot about these loans and I don’t like what I read as a salesperson. One thing that is particularly concerning is the whole VA Approved Reviewer process and how often those reviews are low. We are not yet under contract. They have not yet responded to our last counter. They may not agree. But, if they do, I’m a little worried, although I have the greatest confidence in the house (we’ve done a lot of work there!). ”
It’s sad. Even though the saleswoman admitted that she didn’t have to pay closing costs or that she could negotiate around them, the woman who wrote this was suspicious. And she thinks her house will be undervalued despite having apparently prepared it to move in. She seemed suspicious of VA buyers.
In fact, VA buyers are less likely to default than other buyers, despite their low down payment. Many experts attribute this to military culture – a VA borrower is trained to follow through and do as promised. So maybe less likely to get flaky with a home purchase.
And, as Ellie Mae proves, VA loans are no worse (and maybe a little better) than any other.