Often I hear from buyers and agents that it is tougher to get a VA purchase offer accepted. It is true that some sellers will look the other way when they see a VA purchase offer, due to the zero down payment “no skin in the game”, and the assumption they will also need to cover the VA closing costs. Here are some tips you can use to debunk seller held myths about VA financing, so you can get your VA purchase offer accepted.
The misconception sellers have about VA closing costs
There is a misconception out there that the seller must pay for some or all of a VA 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.
But 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 purchase contract, 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/paid by lender”.
This means the VA Non-Allowable fees will be paid by a lender credit instead of the seller, we do this for all our VA buyers. So now the seller will NOT dismiss the VA offer right away, does NOT have to cover any closing costs, negotiations are easier, and the buyer and seller can strike a deal.
6 Tips to get your VA offer get accepted
Here are some other tips that you can use to help your VA offer get accepted.
1. Include a personal cover letter with your purchase offer
A good idea in this competitive housing market is to include a personal cover letter with the offer that introduces your family and explains why you are the right candidate to purchase the home. Include a family picture too.
If you can tug at the heart strings of the seller, they may be more inclined to choose your offer over others. There are sellers who would love to help a military or veteran family obtain home ownership.
2. Include a VA DU underwriting approval with your offer
Include a VA DU underwriting approval with your offer. A DU (desktop) underwriting approval is when a buyer’s loan application and credit report has been ran through the VA’s automated underwriting systems and was approved.
A DU underwriting approval displays the most important information on a buyer’s profile, which gives the seller a better idea of the strength of the buyer. For example, a DU approval displays a buyer’s credit scores, debt to income ratios, assets, reserves, any applicable down payment and the type of loan program they are approved for.
3. Provide proof of reserves/assets/down payment funds to strengthen offer
The zero down payment requirement with VA means less skin in the game. We can’t argue with this because VA allows 100% financing, so this does amount to very “little skin in the game” from a buyer.
Therefore it’s a good idea to include proof of reserves and assets and any applicable down payment funds along with your offer, so this shows the seller the buyer has applicable funds to close if any additional funds are needed to close the transaction.
4. Increase your deposit
Want to show a seller how serious your offer is? Consider putting down a bigger deposit in earnest money. This may seem risky for some, but earnest money is there for a reason. If you are uncertain about putting a “noticeable” amount of earnest money on the table, it may be a sign to the seller that you are uncertain about the house itself.
Assuming you hold up your end of the bargain and you have the right contingencies in place, it won’t cost you any more in the long run since the deposit goes towards your down payment if financing is involved.
*As a VA buyer typically qualifies for zero down financing, they will get their deposit back at closing.
5. Be flexible and don’t ask the seller for credits to cover closing costs
It’s a good idea to ask the seller’s agent upfront what you can do to make the offer more enticing to the sellers.
For example, can you be flexible on the closing date for the seller? Also, a purchase offer asking for seller credits to pay for your closing costs will usually place behind an offer that does NOT ask for any seller credits. Some people assume just because a buyer does not have funds for closing costs, to just ask the seller to cover them.
SOLUTION: To make a buyers offer more competitive, the lender can pay for ALL the buyers closing costs with a lender credit.
How does this work? It’s easy, instead of taking say a 3.375% 30 year fixed rate, just take a slightly higher rate of 3.75% instead, and now there is a lender credit of roughly 2.5% available that can be used to pay ALL a buyers closing costs.
Not only is this a good negotiating tactic so the buyer and seller can strike a deal, but of course it saves a buyer money too. We present this option to all our buyers.
Another Tip, is to offer to pay for the sellers Owners title policy and transfer tax, these fees amount to roughly $2,500 on a $400k home, so this is another way to sweeten the deal for the seller to accept your offer. If the buyer does not have the funds, we can also pay for these fees with a lender credit.
6. Close the Transaction Faster
Being able to close a transaction faster is another way to entice the seller to accept your offer in this competitive market. For example, if a seller is reviewing 3 offers, and there is a 21 day offer, a 30 day and 45 day offer, many times the seller will take the faster closing.
My company Citywide Financial Corp can close a Conventional, FHA or VA Purchase Transaction in 21-25 days. We have an outstanding team set up and dedicated to help close transactions fast.
Full transparency upfront is the key to getting an offer accepted these days, because usually the “Path of Least Resistance” is what we look for when reviewing offers! As many times the offer that is presented the clearest, is flexible and addresses any issues upfront, is the offer that will be picked!
If you have any questions about any of these tips above or getting approved for financing, please do not hesitate to contact me directly at 858-442-2686. I look forward to chatting soon.