It’s very unfortunate that military veterans who qualify for a VA loan are having a hard time getting sellers to accept their offer. It’s been known and understood for a long time that you can’t buy certain homes because they won’t pass a VA inspection, but now they are having to compete with buyers using conventional loans or paying cash and sellers aren’t accepting their offers.
There are several benefits to using a VA loan, but the biggest is that no down payment is required. Any other loan program will typically require at least a 3% down payment. Another benefit of VA loans are there is no mortgage insurance. With any other loan you have to pay mortgage insurance if you are not paying down at least 20% so this could save the veteran several hundred dollars a month. VA loans are also easier to qualify for because of the credit score requirements and the debt to income ratios can be higher.
Many homes in the current market are being sold for above list price and buyers are even agreeing to pay more than the home appraises for. A lender is not going to loan more than the home appraises for so the buyer has to have to have the cash on hand to pay anything above appraised value. However, even if they have the cash and are willing to pay the additional money, a VA buyer cannot sign anything agreeing to pay more than the home appraises for. Basically, they HAVE to have an “out” if the home doesn’t appraise for the contract amount and they cannot waive that right.
I recently had a veteran who was in this situation. However, he was pre-qualified for a conventional loan as well. We wrote the offer using conventional financing but the lender processed the loan as a VA loan and ordered a VA appraisal. After the appraisal came back and there were no lender required repairs, we sent an amendment to the sellers to sign changing the contract to VA financing, which they were happy to do.
This will only work if the veteran qualifies for a conventional loan and are willing to go that route if there are repairs required and the seller isn’t willing to make those repairs. You also have to have the cash for a down payment if needed as well as cash to pay the additional money above the appraised value. That’s also the case for buyers using any type of loan because the lender will not loan more than the home appraises for.
While sellers are enjoying the current market receiving multiple offers and often getting more for their home than it appraised for, it is certainly a difficult market for buyers. Most of us that work in the industry will be happy when things settle down and everyone who qualifies for a loan will be able to buy a home. I will especially be glad when it will be easier for veterans to utilize all of the VA loan benefits they are entitled to.
If you’re looking to buy a home, let’s connect and discuss the best way to make that happen. Everyone deserves the American Dream of home ownership, especially those that served to protect that dream.
Comments