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3 Tips That Will Help You Close More VA Transactions
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Dear [fname],
Did you know there are over 2.3 million veterans now living in California alone, and with a large
percentage of these based in San Diego, working with VA buyers presents a tremendous opportunity to help you grow your business. I believe VA financing is the best purchase product available in the market today, especially as the VA makes it easier for their members to qualify to purchase a home, and as of today, VA buyers can get 100% financing at an incredible interest rate of 3.75% on a 30 year fixed. Here is all you need to know about VA financing, so you know who qualifies as well as some tips on how to get sellers to accept your VA purchase offers.
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 #1 loan program
1. VA buyers can purchase with $0 down
Did you know that eligible
veterans are allowed to take out a mortgage up to $537,500 and 100%
financing here in San Diego? Check here for your County limit as
designated by the VA, VA Loan Limits for each county for 2011 . VA financing is still the only loan program that allows 100% financing in any area (FYI the USDA allows 100% financing, but this is strictly for rural properties), as the FHA still requires a 3.5% down payment and most conventional loan programs still require anywhere from 3% to 20% down payments depending on the credit profile of the buyer, which is still 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 VA lenders only need a 620 credit score to offer 100% VA financing, whereas FHA and Conventional financing now require higher credit scores. Also some VA lenders allow a buyer to qualify up to a 60% debt to income (DTI) ratio on VA loans, Fannie Mae is now capped at 50%.
3. VA buyers pay no monthly Mortgage Insurance
Another huge advantage for VA buyers is that they do not have to pay any monthly mortgage insurance (MI) on their loans, as these are backed by the government. Remember, most conventional loans require mortgage insurance if you put down less than a 20% down payment, and all FHA loans now require mortgage insurance. So having no monthly mortgage insurance allows VA buyers to either purchase more home, or have have a lower monthly mortgage payment.
3 Tips to get your VA purchase offers accepted
There is a misconception out there that sellers discriminate against
buyers using VA 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 appraisals. Here
are 3 tips to debunk seller held credit myths about VA financing, so you
can ensure your purchase offers will get accepted.
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". But what we can do, is strengthen the VA buyers profile and 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 with their financing.
2. The
(misguided) perception that the seller must pay for some or all of the buyer’s
closing costs.
On VA transactions, the seller is NOT required to
pay ANY costs for the buyer, but is allowed to pay up to 4% towards a VA buyers costs. 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).
So 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 when negotiating a purchase price. 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 by lender”.
3.
The (false) belief that VA appraisers are less generous in their
valuations.
There is a
common misconception that VA appraisals usually come in lower. While I am sure
that a lot of 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 VA 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 maybe 10% of these VA transactions, which is probably typical for other forms of financing too.
TIP. One of the
most common appraisal "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.
Support our Troops, and a great marketing opportunity
Because of the large number of veterans that are living in California, this represents a tremendous opportunity to work with VA buyers. I have always found that VA buyers are a pleasure to work
with because they are very loyal and they communicate very well too, and it also feels good to know you are giving back a little to
our armed forces by helping them obtain home ownership, as they sacrifice so much for all of us on a daily
basis. As a VA buyer is able to purchase a home with 100% financing and get an interest rate of 3.75% on a 30 year fixed, it really is a wonderful opportunity for our military friends to buy a home right now.
If you have any questions in regards
to VA loans please feel free to contact me directly at 858-200-9602. My
company is approved directly with the VA, so we are able to offer all the best
programs that are available to our military friends. I look forward to
chatting soon.
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| In This Issue |
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- Who is eligible for VA financing?
- Frequently asked VA questions
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3 Tips to help get your VA purchase offers accepted
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VA buyers: A great marketing opportunity
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FICO scores for buyers: Here is a really cool site http://scoreinfo.org/ to share with any buyers so they can learn all about their credit and how to improve their credit scores. As Fannie Mae and Freddie Mac have just announced recently that they will be increasing fees on all loans again later this year for buyers with less than perfect credit, share this with any buyers you know who will be purchasing a home soon, as it would be a great idea to see if they can improve their credit scores in the meantime, so they can qualify for the best rates possible and save as much money as possible, by not incurring any of these additional loan fees by Fannie Mae.
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Spread the word: Help get the word out about the incredible buying opportunities that exist right now for all our military friends. Send out an email and a facebook post to your database of clients, family and friends
and let them know about the programs that are available and ask everyone to share these with their military friends. There are still a lot of people out there who
simply don’t know how great these VA programs are, that are available with no monthly mortgage insurance, zero down and 3.75% rates! I
am sure everyone will appreciate you letting them know that this is available to
the people who serve all of us on a daily basis.
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Call Michael At
(858)-200-9602
Joke of the Week
A young man named Murphy applied
for an engineering position at an Irish firm based in Dublin. An
American applied for the same job and both applicants, having the same
qualifications, were asked to take a test by the Department manager.
Upon completion of the test both men only missed one of the questions.
The manager went to Murphy and said, "Thank you for your interest, but we’ve decided to give the American the job."
Murphy: "And why would you be doing that? We both got 9 questions
correct. This being Ireland and me being Irish I should get the job!"
Manager: "We have made our decision not on the correct answers, but on the question you missed."
Murphy: "And just how would one incorrect answer be better than the other?"
Manager: "Simple. The American put down on question # 5, ‘I don’t know.’ You put down ‘Neither do I.’"
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Our experience with Michael and his staff at Citywide was great! All of our questions were answered right away. We appreciated the prompt attention and service which was excellent. We will definitely work with him again and recommend him to others. Michael was very professional and kept in contact with us often to make sure everything was going well. We would highly recommend Michael and his staff.
Ada Meraz & David Gonzalez, San Diego, C
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Sept 20th, 2011
