Veteran’s Day Initially called Armistice Day was established to commemorate the end to World War I and continues to help focus our attention and honor our American Veterans for their patriotism, love of country, and willingness to serve and sacrifice for the common good.

We salute you!  Thank you for your service!!

Even If You’ve Never Experienced “O-Dark 30”, There’s a Benefit to Knowing About VA Loans

Okay so you’ve never been in or near the military and you’re probably wondering why you should read this.  The fact is:  It might impact your bottom line.   Someday you may have an offer from a Veteran or you may know a vet that could make a more informed decision with this information.

Have you ever known someone who doggedly sticks to an opinion despite new factual evidence to the contrary?  A little hubris, a little laziness to check the facts, or maybe it’s just easier to stick to an old line without becoming educated because it will probably go unchallenged?  To be fair, real estate loans, the market, the laws – they change constantly so you want to make sure you have the most up-to-date information and you want to check in with experts who are staying informed.

In your future, there is a fairly good chance that you will encounter an offer from a Vet OR you are a Vet who wants to buy, sell, or Refi.  In the past, the VA loan program (like the VA Hospitals) was run very inefficiently and wasn’t very competitive.  Mike Frueh, the head of the Department of Veterans Affairs Loan Program, calls it the “myth of my father’s VA.” The reputation that still holds sway over agents and sellers reflects some old policies, but the bottom line is that VA Loans have changed.   Let’s shed some light on what’s changed and what hasn’t.

Let’s first focus on the Seller’s perspectivefor-sale

Don’t VA loans take forever to close?

While red tape bureaucracy epitomized government inefficiencies in the past and thwarted efforts to close on time, appraisals now come back under 10 business days on average which is on par with other loan types.  Note to Sellers: VA loans also had a higher closing success rate than conventional loans throughout all of 2015.  That means that unlike conventional or FHA, underwriting for VA is more likely to get the buyer over the finish line.

Don’t VA loans foist all closing costs on the Seller?

While there is a VA loan program called the VA No No which means the Vet puts no money down and pays no closing costs, a VA buyer can also pay up to 1% of the sales price in closing costs to remain competitive in an offer situation.  So on a $350,000 home, the vet may be able to pay $3,500 in closing costs and the Vet still can pay title and escrow fees. The VA does require a Pest Inspection on the home and any outbuildings and that inspection cannot be paid by the Vet (Buyer), but that fee is ~$95-$150 so it’s not exactly material.  In addition, the VA allows the Buyer to pay for repairs.

Don’t VA Appraisers under-value homes?

I can’t promise that your house is going to appraise for what you think it’s worth, but generally speaking, VA appraisals are coming in at market value.

Food for future thought – VA like FHA loans are assumable loans provided that one vet is selling to another.  As interest rates move up, those lower interest rate loans are going to look appealing to buyers that can’t get them anymore.  There’s some unresolved issues in that the house will likely have gone up in value and the Seller needs to be compensated for that value appreciation.  So, currently besides a down payment, there isn’t a way to make up the difference.  Lenders expect that when the situation presents itself, there will also be some loan products available to bridge the divide.

From the VA Buyer’s perspective…va-buyer

So you’re a Vet.  There’s some upside to that.  You served your country and the government will provide you 100% financing with no mortgage insurance!  That’s a great benefit!  Congratulations!

Why should you use VA vs Conventional?

Did you know that you can

  1. Buy a single family home or condo or even an owner occupied multi-unit dwelling of up to 4 units (yes, live in one, and be a landlord and let your tenants pay your mortgage!)
  2. Qualify with a FICO score of just 600 and with easier credit requirements.  You can qualify 2 years after a bankruptcy, short sale, or foreclosure.
  3. Refi with 100% cash-out with no mortgage insurance!  This can be beneficial when you need to upgrade to sell!  Rates are usually better than conventional.   You can use your VA loan more than once but each loan must be paid off before financing the next one.  In the past, the VA had an origination fee for the loan, but that no longer exists.

Isn’t VA just for low income?

No, the VA High Balance Program serves those who served even at the higher price points and because of the no down requirement, this could be a better loan product for you and your family.  Great for Doctors, IT Professionals, or Entrepreneurs (not the exhaustive list, of course!)

Alright, so what’s the downside?

You’ve seen the upsides so what’s the catch?  If you’re a seller and you know that there’s too much Section One (active infestation such as termites or dry rot) repair work to take care of, a VA offer might not be the one to accept because ALL Section One repairs plus any health and safety items will have to be cleared though remember that the Vet may pay for some of the repairs.

The VA Loan isn’t always the best offer – sometimes an all cash offer which will close in a couple of weeks will be the best for the Seller, but at other times VA will be considered a competitive offer.  There are many factors to consider, but a little knowledge goes a long way to helping everyone make a sound and informed financial decision.

Where can I get more information?

I work with a great lender, John Foderaro, who is very knowledgeable about the VA loan products.  Call him.  He’d be very happy to help you understand if VA is the right program for you.  He’s also a great resource on other loans as well!