Qualified VA Buyers Get $8k Tax Credit Extended to June 2011
While all the different loan products in our market seem to be chopping and changing every week, VA financing still stands as the best loan product out there. Did you know the $8k tax credit has been extended for some VA buyers until June 30th 2011? If you are not tapping into the VA market then you are leaving a lot of business on the table. In this weeks newsletter I will discuss 3 tips to use when presenting an offer for a buyer using VA financing.
The $8k tax credit is extended for veterans until June 2011!
While the Home Buyer Tax Credit program will come to an end for most consumers, eligible Veterans will have an extra year to participate in this program? extension of 8k tax credit for VA buyers It’s nice that they are giving these young men and women an extra year to take advantage of the $8,000 first time home buyer tax credit and the $6,500 tax credit for those who are not first time buyers. There is one caveat, though; 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, the same rules apply. These incredible people deserve all of the help they can get after the disruption their service overseas has brought to their everyday lives.
Who is eligible for VA financing
A veteran is eligible for VA financing if he/she served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard and was honorably discharged after 24 continuous months of active duty, or the full period for which called, or ordered to active duty, but not less than 90 days (during wartime) or 181 continuous days (during peacetime).
3 reasons why VA financing is the best loan program
1. VA buyers can purchase with $0 down
On a VA Loan a borrower can finance 100% of the home’s value and purchase with $0 down. Eligible veterans are allowed to take out a mortgage for up to $417,000 (or the County limit as designated by the VA, VA loan limits for each county for 2010 ). Now more than ever banks are requiring larger down payments, the FHA still requires a 3.5% down payment and most conventional loan programs still require 10-20% down, putting home ownership out of reach for many first time home buyers.
2. Easier qualification rules for VA buyers
Most banks have easier qualifying and credit guidelines for VA buyers. Because many first time buyers typically don’t have a lot of established credit, getting qualified for a conventional loan can be difficult. Most lenders only need a 620 score to offer 100% VA financing. Also I have a few lenders that allow us to go to a 60% debt to income (DTI) ratio on VA loans ( remember Fannie Mae has capped conventional loans at 45% dti).
3. VA buyers pay no Mortgage Insurance
Another huge advantage for VA buyers is that the do not have to pay any mortgage insurance (MI) on their loans, as these are backed by the government. As all other loan products carry MI if you put down less than a 20% down payment, this helps VA buyers qualify for even more financing and a lower monthly mortgage payment.
Debunking seller held myth’s about VA financing so you can get your offers accepted
So if VA home loans are great for buyers, then why won’t sellers accept them? Many people will argue that sellers discriminate against buyers using government- assisted financing because of the following reasons:
The low down payment requirement means less skin in the game.
The (misguided) perception that the seller must pay for some or all of the buyer’s closing costs.
The (false) belief that VA appraisers are less generous in their valuations.
Here are 3 tips to use when presenting an offer for a buyer using VA financing.
1. The low down payment requirement means less skin in the game
We can’t argue this because it’s logistically true. 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 “non-allowable” costs for which the buyer is forbidden to pay, for example some of these are (No escrow, wiring, notary, tax service, or loan application or processing fees are allowed). Here is a good tip to help get an offer accepted. 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 plenty of people have had a VA appraisal come in lower, 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 2 VA transactions a month for the past year and I have only seen a value come in lower in one out of the last 10, as the home was way overpriced.
One of the most common “hits’ 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 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). VA 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. The seller is expected to pay for the repairs. Make sure you are aware of VA financing rules, so you are pairing up your VA buyer with the right property.
Why VA buyers are great to work with
With over 2.3 million veterans in California and with a large percentage of these based in San Diego, this presents a great opportunity to work with VA buyers. I think VA buyers are great to work with as they are usually very loyal and communicate very efficiently (those are two of the biggest complaints I have heard about buyers recently). I always feel that I am giving a little back to our armed forces too, as they do this for all of us on a daily basis. They are great for referrals too if you take very good care of them, as they always know a colleague who is interested in buying a home.
If you have any questions in regards to VA loans or you need help getting anyone pre approved for VA financing, please feel free to contact me directly at 858-200-9602. My company is approved directly with the VA, so we can offer excellent service and rates for all our military friends. I look forward to chatting soon.
This entry was posted on Thursday, May 13th, 2010 at 8:03 pm and is filed under Qualified VA Buyers Get $8k Tax Credit Extended to June 2011. 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.