To all our active duty service members and military veterans: thank you for your service. The sacrifices that you make for each of us as individuals and as a collective United States warrant some serious benefits. In the business of real estate, this is offered in the form of a VA loan. Unfortunately, in today’s market, those two little letters (VA) can be the red flag that puts your offer at the bottom of the pile.
The VA loan is a great product that is available to most regular military members, veterans, reservists or members of National Guard. Spouses of military members who died while on active duty or as a result of service can also apply. The advantages include; no down payment requirements, no private mortgage insurance, competitive rates and little or no money out of pocket at closing. It’s a pretty sweet deal — a deal that the men and women fighting for our freedoms deserve — but it’s not winning them a home in the house-bidding war.
Housing discrimination is illegal. The protected classes include: race, national origin, color, religion, sex, familial status, disability, sexual orientation and gender identification. Sellers can, however, reject an offer due to the type of financing. It just doesn’t seem right. If it were my Utopia, all other items being equal, the VA buyer would have the advantage. This is not my Utopia. I will, however, attempt here to educate and dispel myths that may currently be in place that are hurting our VA buyer.
In the last 365 days, in Northern Utah alone, nearly 20 percent of all loans closed were VA financed. That is significant. Yet word on the street has it that VA loans are the piranha of home loans for a seller. These loan types are known for the strict appraisal procedures, slower processing times and lower appraised values. Let’s just tuck those rumors into bed and let them sleep the eternal slumber. This is no longer your parents VA loan.
The truth is: VA loans are getting processed just as quickly as a conventional loan for most buyers. Using a reputable, VA approved lender that has plenty of experience with this type of loan can speed the process along. The fear of appraisal value coming in low can be combated with the knowledge that there is an extra step that can be taken in the VA appraisal process if the value comes in short. This is called the Tidewater Initiative. It’s basically an appeals process where the Realtor can provide additional information or comparisons to help prove the value of a home.
The other primary concern that sellers seem to have with VA loans is that the home must adhere to minimum property requirements. The guidelines are much more lenient than they were in the days of yore, yet at the same time, they are very basic requirements that include very basic standards of safety, structure and sanitation. In other words, don’t cook meth, use cardboard cutouts for windows or hold your deck up with duct tape and you should be just fine. Frankly, a home inspection is going to uncover far more than a VA appraisal will find and almost everyone, regardless of the loan type, is going to opt for a home inspection.
For the sellers: VA buyers are solid, secured, motivated and ready to close. For the VA buyer: be sure you have good representation. Your licensed Realtor can help you make your offer more attractive to a seller. There is still plenty to be said for the human element. We really do appreciate your service and most of us agree that you should be rewarded for it in the housing market as well.