The process will be a little different than what you’re used to, but don’t let the lack of familiarity lead you to dissuade a buyer from using their hard-earned VA benefit. After closing a few VA loans, you may begin to enjoy the service you are providing to those who’ve served our country.
With a little time and patience, you can become a VA-knowledgeable agent who your veteran clients will want to refer to their friends. The VA mortgage market is booming, so don’t miss this chance to start your career off right by becoming the local expert on VA loans.
Here’s a look at four key introductory lessons to this historic home loan program:
1. VA Mortgages Are Booming
The VA home loan guaranty program has been growing at an amazing pace. The VA backed nearly 630,000 mortgages in fiscal year 2013, a 370 percent increase from FY 2007. (To view statistics for your state, check out this great interactive map.)
To understand why veterans are flocking to the VA mortgage in greater numbers, you have to understand some of the key benefits of the program:
- No down payment required on loans under the county loan limit
- No private mortgage insurance (PMI) regardless of down payment
- Competitive interest rates
- More flexible credit score requirements, typically only needing a 620 to qualify
- More flexible debt-to-income requirements than other loan types
With these great benefits, it’s no wonder so many veterans and active duty service members are using their hard-earned benefit. As a real estate agent, if you aren’t working with VA buyers, you could be missing out on a growing opportunity for sales. Lending restrictions instituted in recent years have made the VA loan program more important than ever for those who serve our country. For many, this program is their only route to homeownership.
2. Minimum Property Requirements
The main purpose of the VA’s Minimum Property Requirements (MPRs) is to ensure the veteran is purchasing a home that is safe, habitable and marketable. I’ve covered several of the most common MPRs in a previous post. You can find a more comprehensive list in Chapter 12 of the VA lender’s handbook. A VA loan can’t close until the home meets all MPRs, so it’s imperative to become familiar with them. You can earn trust and save your clients money and hassle by guiding them to homes that should meet all MPRs.
If your buyer is set on a home that won’t meet one or more MPRs, it’s very helpful to know this going into contract. By doing so you can work with the buyer and seller to set expectations. You’ll also need to arrange for any necessary repairs right away to avoid a closing delay. Knowing the MPRs can also reduce the rate of contract fallout if you negotiate the repairs at the time of the initial offer, rather than springing the bad news on the seller weeks into the contract.
Here’s a few examples to introduce you to common MPRs that must be remedied prior to closing:
- Peeling paint will have to be scrubbed and repainted due to the possibility of a lead hazard.
- The presence of termites or other wood-destroying organisms the property will have to be treated.
- Hazardous conditions, such as exposed wires or holes in the wall, will need to be capped or covered.
3. Eligibility and Multiple Uses
You should ask every single one of your clients whether they’ve served. Many may not be aware they have this amazing benefit. If they answer “yes,” guide them to a loan officer specializing in VA loans, such as Veterans United Home Loans. From there, eligibility and prequalification can be determined. The VA has provided very clear service requirements to determine who is and isn’t eligible to use the benefit.
For those who think they can’t use their benefit again (and that’s a common misconception), you may be the bearer of good news. Let them know that it’s possible to and to talk with a VA mortgage specialist. In our struggling economy, a no-down payment loan can open up vast opportunities to increase your sales. In addition to $0 down, VA loans have a number of other key benefits other loan products can’t touch.
4. Closing Costs and VA Non-Allowables
VA loan closing costs can’t be rolled into the mortgage, beyond the VA Funding Fee. Talk with your client early and often about these costs and how they want to deal with them. There’s no limit to how much sellers can contribute for closing costs, but you need to know before negotiating a contract whether these costs need to be covered by the seller or if the buyer can pay them. There’s a 4 percent cap on seller concessions.
There are also what’s called VA non-allowables. These are fees that a VA buyer can’t pay. Some common non-allowable fees and charges include the pest inspection (in some states), attorney’s fees for anything other than title work and a range of other costs. If you have a question as to whether any particular fee is allowed, get in touch with the buyer’s loan officer.
Earn greater credibility and the possibility of more referrals by becoming knowledgeable about all aspects of the VA mortgage process.While this article hits on some of the major features of the VA loan, be sure to check out our other articles on this blog for a more in-depth knowledge and understanding of this amazing program and its multiple benefits.
Please feel free to reach out to me with any specific questions at firstname.lastname@example.org.