I work hard to maintain a positive outlook on things, constantly reminding myself how lucky I am to live not only in the best country on the planet, but also in one of the best parts of the best country on the planet. But every now and again, something comes up that allows me to get perturbed, guilt-free.
I have a client who just lost out on a deal because the home seller said she “hates VA loans.” This is a trend that has been going on for years, and I quite frankly have had enough of it.
The VA loan is one of the best loans on the market. It funds up to 100 percent of the value of the home without charging the veteran monthly mortgage insurance. They do have to pay a funding fee, and it can be steep, but it gets rolled into the loan amount so they don’t have to come out of pocket for it. The VA loan also has some of the best interest rates on the market when you compare it to FHA and conventional loans. And the guidelines in some cases are much more flexible in qualifying a borrower.
It’s an awesome loan, and it’s the very least we can do for someone who signed a piece of paper agreeing to risk their life for our country. I would have thought a seller would accept an offer because it was a veteran making it.
The VA loan has developed a reputation in our industry as being less reliable than other loans. There are really two reasons for this. The first is the appraisal process.
Unlike other types of loans, VA appraisals have to be ordered directly through the VA. And there isn’t much a lender can do to hurry an appraisal along. So listing agents and sellers are wary that VA appraisals will take too long. I never really argued with them there. But before writing this, I looked at my last six VA loans. I was surprised to find that they had an average turn-time of only 9 days! That’s not business days, that’s actual days. I ran the same numbers for my last six conventional and FHA loans and they averaged 7 days. So I’m not seeing a significant delay.
Agents and sellers also worry about the VA appraisal bringing in lower values. Again, I looked at my last six appraisals and found that none of them came in below the purchase price. In fact, the average value came in at 1.34 percent above the purchase price. If this was the Myth Busters show, I’d say that this myth about VA appraisals being risky, at least for the Atlanta Metro area and for us here at Assurance, has been busted.
The second thing most sellers and listing agents worry about with a VA loan has to do with the idea that it’s processes and guidelines are just so different than more common loans. Some say they are more strict when it comes to repairs on homes, but I haven’t had any real issues that wouldn’t have come up with an FHA appraisal. Some say they are worried about having to pay closing costs that the VA doesn’t allow the veteran to pay. But I’ve never seen a seller have to pay any more than a couple hundred bucks — which is a pretty small price in the grand scheme of a $100,000-plus transaction.
I’m sure some have horror stories, and I went through several chat rooms on the internet. But most of the complaints I saw really had more to do with the lender not properly pre-qualifying the buyer, or the appraiser just doing a bad job — things that can happen with any type of loan.
The VA loan was established as a way to give back to those who gave us the freedom to live comfortably in the homes we will one day sell. Don’t get caught up in the hype. Just make sure there is a good lender helping that veteran with the VA loan, and you should be fine.
Geoff Smith is a mortgage banker with Assurance Financial focusing on residential home loans for refinances and home purchases.
*The views and opinions expressed in this column do not necessarily reflect the views of Assurance Financial Group