3 Tips To Ensure Your VA Purchase Offers Get Accepted
There is little doubt that VA buyers probably get to take advantage of the best financing program out there, as all VA buyers can qualify for 100% financing. So if VA home loans are so great for buyers, then why do some sellers discriminate against VA purchase offers? Many people will argue that sellers discriminate against buyers using government- assisted financing because of the following three reasons: 1. The low down payment requirement means less skin in the game. 2. The (misguided) perception that the seller must pay for some or all of the buyer’s closing costs. 3. The (false) belief that VA appraisers are less generous in their valuations. Here are 3 tips below to debunk seller held credit myths about VA financing so you can get your offers accepted.
3 Tips to Get VA Offers Accepted
Here are the 3 tips to use when presenting an offer for a buyer using VA financing, so to ensure your offer will have a better chance of getting approved.
1. The zero down payment requirement means less skin in the game
We can’t argue with this because VA does allow 100% financing, so this does amount to very “little skin in the game”. What we can do here is show the seller that the borrower has a DU approved loan (automated underwriting approval) and also include income and asset documentation (proof of reserves etc) to support that approval. This will assuage the fears a seller might have about a buyer (and that buyer’s lender) performing within a prescribed time period.
2. The (misguided) perception that the seller must pay for some or all of the buyer’s closing costs.
The seller is NOT required to pay ANY costs for the buyer, but is allowed to pay up to 4% for VA loans. There are certain “VA non-allowable” costs for which a VA buyer is forbidden to pay, (for example No escrow fees, wiring, notary, tax service or processing fees are allowed to be charged).
Here is a good tip to help get a VA offer accepted, so this issue of who covers these VA non allowable fees does not become an issue. It is advised that the following language be inserted in to the CAR purchase and sale agreement so the seller is not put off by the VA offer: “Seller not responsible for any buyer closing costs, regardless of the selected loan program. All agency-related “non-allowable” costs to be borne by lender”.
3. The (false) belief that VA appraisers are less generous in their valuations.
This is a common misperception that VA appraisals usually come in lower. While I am sure that some people have had a VA appraisal come in lower I am sure they can say the same about FHA and conventional financing too, underwriters and appraisers will point out that as long as the property is properly priced and the offer is reasonable, the appraisal should go smoothly. I have been averaging at least 2 VA transactions a month for the past few years and I have only seen a value come in lower in less than 10% of transactions.
One of the most common appraisal “hits” on the appraisal I have seen is when the purchase price is increased, above listing price, to accommodate for the seller-paid contribution. Be wary of that when submitting/accepting offers and have a back-up plan. If the appraisal does come in low make sure the buyer has additional reserves to potentially come in with more cash to close. Remember the lender will only approve financing to 100% of the appraised value.
VA Requirements on REO’s and short sales
Be careful with REO’s and short sales for VA buyers, as these properties must meet the VA minimum property requirements (MPR’s). See VA appraisal requirements on foreclosed properties Properties that can be repaired prior to closing to satisfy the MPR’s may be appraised as if the repairs were done. FYI the seller is expected to pay for any repairs.
VA $8k Home Buyer Tax Credit Extension
Remember there are only about 45 days left for VA buyers to take advantage of the $8k home buyer tax credit extension. This respresents a great marketing opportunity to try and get some additional VA buyers. As a reminder here are the rules for qualifying again and also here is a link to the IRS website so you can verify the right information to tell your clients. IRS rules on extension of 8k tax credit for VA buyers
- The $8k is available for first time buyers only.
- The $6500 is available for any buyers who have not owned a home in 3 years
- The contract has to be signed and in escrow by April 30th to close by June 30th
- The veteran must have been on active duty outside the US for at least 90 days between December 31st 2008 and May 1st 2010, Otherwise they cannot qualify.
If you have any questions about any of the information above, please do not hesitate to contact me directly at 858-200-9602. I look forward to chatting soon.
This entry was posted on Thursday, February 17th, 2011 at 12:47 am and is filed under 3 Tips To Ensure Your VA Purchase Offers Get Accepted. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.