If you’re a Seller and not open to accepting VA loans in San Diego County, why are you purposefully excluding a large pool of well qualified Buyers in a military, DOD, defense town filled with both active duty and retired veterans?
Matthew Shaver of Synergy One Lending, who has worked on 100s of VA loans, and I chatted about why VA loans are a great mortgage product and why Sellers should absolutely be willing to accept them.
Why are VA loans attractive to borrowers, but also to you as a Seller?
VA loans allow for $0 down for the borrower. This means they can leverage their cash for repairs, closing costs, or to upgrade the home. Versus conventional or cash borrowers are typically putting cash down, or higher down payments to avoid higher mortgage rates
VA loans allow for some of the highest debt to income ratios, lower credit scores, no verification of rent payments, therefore fewer issues come up in escrow during the loan underwriting process
Active duty members have pretty solid employment + tax free housing allowances
There is no difference in mortgage rate for Borrowers between national loan limits and high balance, but VA rates are typically lower than conventional. Technically there is no loan limit for VA loans, but most loan originators will have a cap, at say $2M (varies by lender)
VA loan entitlements can be used again for another home, but typically you can only have 1 VA loan at a time
Misconceptions about VA loans
Only certain lenders can do VA loans- absolutely not true. Large banks, credit unions, wholesale and direct lenders can all offer VA mortgages. In fact some of the lenders who market to veterans often are slow to respond, have no dedicated loan officer, are not competitive on rates, or charge very high fees.
Slower to close: this is a lender issue, not a loan type issue per se. Some lenders can close conventional loans in 14 days, and others need 30-45 days.
Shaver can close these loans as fast as 14 Days. These are calendar days, every single day counts when both parties consummate the contract
Appraisal turnaround is longer: both conventional and VA loan turnaround times are similar when they are ordered on a rush. With the right lender, the appraisal is back within the first 7 days, or often well within the Buyers contingency timeframe
Appraisals are stricter: every appraisal, whether it’s conventional, FHA, VA, or jumbo will look for basic habitability & safety items required in all properties. Please keep in mind there is subjectivity in appraisals depending who the actual appraiser is and 1 appraiser who may call certain things out for any loan type, others will not. In general, all appraisals require a working stove, property to be heated, finished flooring, no major structural issues that are unsafe, toilets, running water, smoke detectors, carbon monoxide detectors, water heater to be double strapped and braced, and no flaking/peeling paint on properties older than 1978. Some appraisers will call out other safety items like deadbolt locks on both sides which is a fire hazard
VA loans uniquely require that window screens not be worn nor torn. However there can be no screens, so its as simple as the Seller removing the torn/worn screens from the property
VA Buyers cannot waive their appraisal contingency due to VA loan rules & Tidewater
The FHA/VA Amendatory Clause is automatically apart of the RPA (Residential Purchase Agreement aka the offer contract) in CA for FHA & VA loans. The Buyer can write in an amount that they agree to purchase the property at, irregardless of the appraised value
Shaver loves Tidewater. On other appraisals for conventional and jumbo loans, they just come back at whatever value the appraiser has determined and once an appraisal has come back, they are very difficult to counter. Versus on VA loans, the appraiser notifies the lender that the appraised value may not meet the purchase price. They give both sides 48 hours to provide additional information to the appraiser that supports the purchase price
Contingency timelines are longer: As noted, appraisals can come back quickly when ordered on a rush, and the underwriting process to get to conditional loan approval is no longer than conventional or other mortgages
Sellers must pay for closing costs: this is not true. Often each side pays their own closing costs respectively, but this can be negotiated where the Buyer or Seller can pick up the closing costs
Sellers must complete a Section 1 & 2 clearance for termites/wood destroying pests: Yes, an inspection report and clearance is required prior to Close of Escrow. However, the Seller does NOT have to pay for this work. This is negotiated and the Buyer can opt to pay for it.
Unlike other loans, where the Section 1 & 2 clearance is not needed to close escrow, a Section 1 is required for VA loans, and a Section 2 may be required at the underwriter’s discretion
As a Seller, you are moving anyhow. If a fumigation is required, then the work can be scheduled accordingly after you’ve moved out and the clearance certificate provided to the lender 1 day prior to Close of Escrow
If you do not want to deal with fumigation in the case of tenant occupied properties, most pest control companies will offer a substandard alternate treatment, but still affords the Section 1 & 2 clearance
Sellers must pay for and complete any other VA appraisal required items
This can be negotiated, including the Buyer paying for these items through escrow
Condo Complexes must be VA approved: this is correct. Unlike FHA, once condo projects are approved by the VA, it is approved for life. No condo certificate is required, which again, limits the issues that can arise in underwriting and also saves time & money.
If the condo project is not already approved, the VA is doing spot approvals which take weeks to months, so if you are Selling and want to include VA buyers, contact your HOA management/condo board about starting the process to obtain approval.
In Summary: VA loans are easy loans for experienced loan officers and Realtors to close. If you are a Seller not accepting these loan types, then you are eliminating unnecessarily, potential Buyers from competing and paying top dollar for your home!