How To Successfully Navigate Your VA Purchase
Department of Veterans Affairs (VA) loans are a unique benefit for eligible military veterans and active duty personnel. They provide 100 percent financing so qualified buyers can get into a home without making a down payment. Since these loans are government-insured, the VA loan program offers flexible credit requirements and limited closing fees.
With the number of active duty, retired, and prior-military service veterans in Hawaii, the VA loan program is particularly popular here. However, many VA homebuyers have challenges in getting their offers accepted in today’s competitive real estate market. The following covers several potential challenges along with solutions to consider:
• Since most VA buyers submit offers with no down payment, sellers are comparing these terms to other offers that may have down payments. Despite the down payment factor, many VA borrowers, retired or active duty, present stable income and employment profiles which aid in their qualification for the loan. In addition, the seller would realize approximately the same net proceeds from the sale as compared to offers with down payments. Finally, since sellers pay a higher conveyance tax percentage if their buyer is an investor, sellers may actually benefit from reduced conveyance taxes with a VA buyer.
• While all condominium projects must be VA approved in order for the VA buyer to obtain financing, many sellers and lenders may not be aware of the condominium review process with VA. Some lenders, including Compass Home Loans, will take the steps necessary to obtain a VA project approval for the buyer during the course of the transaction. Discuss the condominium project with the lender to ensure that the project is approvable and that the lender can submit the paperwork to VA for the review.
• Many single-family homes have unpermitted additions and improvements, which had created problems for VA buyers in the past. In September 2014, the VA Regional Loan Center issued a bulletin to clarify that the VA may accept unpermitted areas under certain conditions. Many sellers and real estate agents are still unaware of this change and may not be considering potentially viable offers from VA buyers. Some lenders, including Compass Home Loans, will work with the buyer and the seller to obtain the documentation necessary to obtain a waiver from the VA for the unpermitted area. Have a conversation with the lender to discuss the specific unpermitted issue and if obtaining a waiver is feasible.
• There are also some misperceptions regarding the VA appraisal process and delays associated with the program. In August 2014, the VA issued a bulletin to establish timelines for the lenders and appraisers involved in VA purchase transactions. Since issuance of this bulletin, VA appraisals have been completed in a more efficient manner, resulting in fewer delays and increasing the likelihood for closing VA loans in a competitive timeframe. In addition, if an appraised value does come in below the sales price, the veteran buyer may still decide to make up the difference between the sales price and appraised value in order to complete the transaction.
There is little question that the VA loan program offers excellent opportunities for veterans and active duty buyers in today’s market. It is a terrific loan option right now for any qualified buyer, while offering sellers access to a large and typically well-qualified market of buyers. For more information on this program or on Compass Home Loans, please contact a Compass mortgage professional at (808) 518-3650 or www.compasshawaii.com.