V.A. FINANCING IS AN EXCELLENT OPTION FOR MANY WHO DON'T REALIZE IT
Written by Bob Hunt on Monday, 10 March 2014 1:45 pm
United States military veterans are not a protected class for purposes of anti-discrimination actions. But, in some areas, they should be. My market (south Orange County, California) is one of those areas. OK, ok, to be precise, it is not vets, per se, who are treated in a discriminatory fashion, it is vets who want to use V.A. financing.
That this is an issue could certainly be surprising to many real estate agents. There are many parts of the country where V.A. financing is the bread and butter of the business. There are market areas where V.A. and FHA financing are the norm. If you work in one of those areas, you might find it almost incomprehensible that many -- probably most -- agents in areas such as this one have never been involved in a transaction in which V.A. financing was used.
The problem, then, becomes this: When an offer is brought that involves V.A. financing, it is liable to be dismissed out of hand. Why? Because the agent -- never having had first-hand experience with V.A. financing -- relies on horror stories and bad-news experiences handed down from days long gone by.
Thus we thank our good friend, Kevin Budde, one of the brighter lights in our part of the lending world, for providing the inspiration and most of the factual content, for today's column.
Kevin says that there are four myths about V.A. financing that inhibit agents in our, and similar, areas from using and/or accepting V.A. financing.
Myth number one is that sellers will have to pay points based upon the loan amount. This belief dates back to days when the (maximum) interest rate was set periodically by the V.A. In those days, if market rates available to lenders were higher than the rate set by the V.A., the veteran could not make up the difference, so the seller had to. Today, V.A. loan rates float with the market. (At the time of this writing they are about 4.125%). There is no longer a ‘gap' that the seller has to fill.
The second myth is that sellers have to pay additional closing cost fees that the veteran is not allowed to pay. Undertoday's rules, the veteran pays customary buyer's fees in the market area.
A third ancient seller objection to V.A. loans is that V.A. appraisals often require "fix it" work (paint window sills, replace cabinet handles, etc.) that increases the seller's costs. Kevin points out that now, "…the focus is on health and safety issues of the property which are deficiencies that could cause harm to the occupant." These would need to be addressed in any kind of transaction.
Finally, there are those who still believe that V.A. insured loans take much longer to close than do conventional ones. It just isn't -- or needn't be -- so. If everyone does their homework and submits information on time, V.A. loans close within the same time frames that conventional loans do.
V.A. loan guarantee limits vary from area to area. In Orange County, California, the limit -- with no down payment -- is $687,500. In Monterey County, California, it is $500,000. In Arapahoe County, Colorado, it is $425,000. But a vet can buy above the limit by putting down 25% of the amount above the limit. Thus, here in this area, a vet could buy an $800,000 house putting only $28,125 (3.5%) down. What former E-4 Corporal wouldn't want to do that?
V.A. financing opens up purchasing possibilities to a significant number of qualified buyers. Sellers -- or their agents -- who don't want to accommodate that are making a serious mistake.