Strategies for veterans buying their first home using their VA loan
In many areas of the country, real estate markets have experienced inventory shortages, especially in major metropolitan areas. The seller will, in many cases, have several competing offers to choose from, and it can be difficult for the veteran buyer to find an owner who will accept an offer using VA financing. Based on past numbers from veteran buyers, several strategies on how to make your VA offer as competitive as other types of financing, such as a conventional or FHA offer, will be illustrated. You may want to discuss your options with your loan officer to increase your chances of your offer being accepted.
There are usually 5 main areas of concern:
1) Closing costs
2) Misunderstanding of mandatory fees
3) VA evaluation vs. Conventional Appraisal or FHA Appraisal
4) An offer with more money seems more attractive to a seller
5) VA offer requires a termite clearance
These 5 topics will be further elaborated in this article. Understanding these 5 common areas of misconception will likely increase your chances of getting an accepted offer.
Many veterans need help with closing costs. In a seller’s market, instead of asking a seller to help you pay closing costs, you may want your lender to raise your interest rate and apply for lender credit to cover closing costs. With regards to additional fees, many agents are under the misconception that a seller would be responsible for the mandatory fees.
This group of fees includes: escrow, processing and subscription. VA guidelines state that these fees are the seller’s responsibility when the lender charges a 1-point loan origination (which is rare in today’s credit environment).
This concern needs to be addressed so that all parties have an accurate understanding of the VA guidelines. The most significant misconception is that a VA adjuster can request further repairs on the subject property. In today’s lending world, due to more stringent federal guidelines, conventional, FHA, or VA loan appraisals use similar standards.
Many sellers believe that a conventional offer with a 20% down payment appears to be a stronger offer than a VA loan with no down payment. The offer with the highest down payment is believed to have a higher probability of closing. If both buyers have been pre-approved by an experienced loan officer and the borrower’s information has been pre-approved by Fannie Mae’s underwriting software called Desktop Underwriting, then both buyers have an equal chance of closing.
The only area where the VA loan may have a slight disadvantage is that the VA requires a termite report and clearance, but conventional and FHA loans do not. VA guidelines allow you to pay for repairs, but not the report itself. You can offer to pay for the repairs if the report is available and you know the costs. If the repairs are expensive and the seller decides to reject the repairs, it may be a house that needs to be transferred.