Orange County home sellers should take offers to purchase their homes from Veterans using VA financing seriously. It can be frustrating for Veterans in Orange County when sellers seem to disregard an offer because of a fear that somehow a VA loan has a lesser chance of closing than other types of financing. Besides the fact that Veterans did serve our country and fight for our freedom, the VA loan program is a solid and easy to close loan. So why do some sellers (and maybe their real estate agents) think otherwise?
Common Myth’s About the VA Loan
- The seller is required to pay closing costs for the Veteran. – Uh yeah, NO. This is not the case. The seller is NOT required to pay closing costs for the buyer. The buyer can pay their costs. Why do some real estate agents and their sellers think they must pay the buyers closing costs? Most likely because of the commonly misunderstood “non-allowable” closing costs. However, the Veteran is allowed to pay up to 1% of the loan amount in what would be considered “non-allowable” closing costs. The biggest non-allowable cost is the escrow fee. If an Orange County Veteran is buying a home for $400,000, then they can pay $4,000 towards non-allowables. And the escrow fee on a $400,000 purchase price will not be close to $4,000. So there is no problem. On top of that, in many cases the lender can issue a lender credit that will cover the Veterans closing costs. THE SELLER IS NOT PAYING THE BUYERS COSTS.
- VA appraisers are conservative. – Couldn’t be further from the truth. VA appraisers are probably the most experienced group of appraisers out there. Also, it’s not like a VA appraiser is ONLY a VA appraiser. They have experience with all types of appraisals. Would you rather have an experienced appraiser appraising your home, or an inexperienced appraiser (maybe even an “apprentice”) showing up for your Conventional loan buyer. The valuation process for a VA appraisal is the same as for other types of loan programs. Recent sales comparables are adjusted based on size, condition, time of the sale, etc. If VA appraisers were going out there are cutting the value on their appraisals, then yes, that would be frustrating. But that is just not the case.
- If the appraisal comes in low then the loan is dead. – Actually, that is not the case. Everything in real estate is negotiable. This “myth” is not even specific to the VA loan program. There is probably more flexibility with a VA buyer if the appraisal comes in low than with most other buyers. Think about it. VA allows for 100% financing. Just because a Veteran is not coming in the with a down payment doesn’t mean they have no money. If the value on a $500,000 purchase price comes in at $490,000, then the Veteran can either just come in with a $10,000 down payment, or negotiate with the seller for a price at $490,000 or somewhere between $500,000 and $490,000. There are situations where there are no sales comparables available to support the price a buyer is willing to pay, no matter what type of financing the buyer is using. A Conventional buyer coming in with an even 10% or 20% down may be stretching and have no additional funds if their appraisal comes in low. At least with VA there is a little more flexibility in this situation.
- The VA appraiser will require repairs to the home. – Again, this should not be something that is specific to VA. While it’s true that a VA appraiser, just like an FHA appraiser, will call out safety concerns like loose wires hanging from an outlet, these types of things will be called out on any home inspection report, which just about any home buyer will want prior to closing escrow. With VA, if there are repairs that need to fixed prior to funding, the Veteran can pay for the repairs. Like other types of financing, just about everything is negotiable.
- VA Loans Take Longer to Close. – VA loans can easily be closed in 30 days or less, if being processed by an Orange County lender who specializes in VA loans. That can be said for all types of financing. These days most VA buyers have already talked to a lender and have their PreApproval letter in hand. The lender already has their paystubs, W2’s, tax returns, bank statements, etc. It’s not like the lender needs to send the file into VA. VA will eventually guarantee the loan for the lender, but VA does not underwrite or review the loan. The lender does, just like any other type of loan. And just like other types of financing, the appraisal is ordered immediately upon offer acceptance. Being in escrow to buy or sell a home can be scary no matter what type of financing the buyer is using for the purchase. What’s important is making sure the lender processing the loan is experienced and stays on top of the calendar and contingency dates.
Is there Anything to be Aware of with a VA Loan?
The only unique thing about a VA loan in Orange County is the requirement for a clear termite report. Yes, VA does require a clear termite report prior to funding the loan if the property is a single family home. (This is generally not required for condos). Section 1 of the report must be cleared by the inspection company. So if the property is infested with termites and needs to be tented, then be ready for that before closing. The buyer can actually pay for the repairs since, again, everything is negotiable. Just like with any other type of financing.
So when a Veteran makes an offer on your Orange County home, take that offer seriously. They must like your home and depending on their current situation, have visions of living in your home for many years to come.
Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com