A huge benefit of serving in the military is the Veteran's Administration (VA) Loan Program. The program allows eligible veterans to purchase a home with no down payment and no requirement for private mortgage insurance, which can up the cost of a monthly mortgage payment.
In this market, there is a perception among many sellers that a VA loan is less desirable than a conventional loan. Here are a few ways to make your VA loan offer more desirable and how to avoid a costly mistake by not understanding what a VA inspection is.
There are many ways you can make your offer more appealing to sellers. Here are a few tips from Jared Russell, realtor/broker with the Russell Home Group, Keller Williams South Sound, and a retired soldier (jared.russell@kw.com, 760.590.7549).
- Offer earnest money. This is a down payment paid to the lender toward the balance of the home's sale price. Earnest money is about good faith. A typical deposit amount in the Thurston County area is $1,000. This will generally suffice, but if you want to stand out against multiple offers (very common now), upping that amount a couple thousand might make the difference. Earnest money is the "insurance" the seller will keep if the buyer backs out of the transaction for no good reason.
- Shorten the inspection period. When writing an offer, a VA buyer may want to consider shortening the inspection period. This is the phase after an offer has been accepted by the seller but the terms are written into the offer. Under the Northwest Multiple Listing Service (NWMLS) standard real estate documents, the default period of time a buyer has to inspect the home is 10 days. This period can be shortened in the offer to perhaps make it more desirable than the next offer. I would never suggest completely waiving your right to an inspection.
- Don't expect the seller to pay closing costs. In today's market, asking a seller to pay closing costs out of their proceeds can be a deal killer.
- Get preapproval. Although not required to make an offer, having a preapproval letter lets the seller know you've taken the steps to obtain financing and have passed at least an initial scrub by the lender. If your lender is willing to send your application through the underwriting process ahead of time, this looks even better. You want the seller to know all you need is a sales contract and an inspection to close on the deal.
To avoid a costly mistake, make sure you understand what a VA inspection is.
"It is unfortunate that the name for a VA appraisal is called a VA Inspection," said Eric Herbel, a broker with RE/MAX Professionals (ericherbel@remax.net, 253.988.6262). "This unfortunate phrase results in two major misunderstandings in the real estate market: one misunderstanding by sellers, and one misunderstanding by buyers.
"Sellers, when they hear the phrase ‘VA Inspection,' believe that the appraisal for a VA loan will be more stringent," he continued. "Sellers believe that the VA appraiser will treat their home differently than would a conventional loan appraiser or an FHA loan appraiser. For this reason (and unfortunately, this is exacerbated by too many real estate agents), sellers will be less inclined to accept offers from VA buyers. This directly, and very negatively, affects the chances of a VA buyer getting an offer accepted by a seller.
"Buyers, when they hear the phrase ‘VA Inspection,' believe that they are getting an appraisal and some kind of inspection," Herbel added. "This could not be further from the truth. The average VA ‘inspection' lasts all of 20 minutes. They measure the exterior of the home. They visually inspect the siding, the roof, and each of the rooms. However, they do not go up onto the roof. They take a photo of the crawlspace. However, they do not go into the crawlspace and explore the entire perimeter. And most importantly, they do no electrical inspection; they do no plumbing inspection; they do no inspection of appliances; they do no roof inspection; and they do no attic inspection. A real inspection, completed by a licensed, experienced and honest inspector, typically takes anywhere from two to four hours, depending on the size and complexity of the home. VA buyers should rarely, if ever, waive their right to complete a full inspection before buying a home. Wouldn't it be great if we all just called it what it is -- a VA appraisal!"
In a tough market for buyers, a licensed, experienced real estate professional can help you navigate the waters and use your benefits to find the home of your dreams.