Real Estate Blog - VA LOANS - DON'T BELIEVE EVERTHING YOU READ OR HEAR.

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VA LOANS - DON'T BELIEVE EVERTHING YOU READ OR HEAR.

SEPARATING FACT (and a bit of opinion) FROM RUMOR ABOUT VA LOANS IS LONG OVERDUE.

WE CONTINUE TO READ POSTS and ARTICLES THAT NEGATIVELY DESCRIBE THE VA LOAN AS:

1. VA LOANS TAKE TOO LONG. Compared to what? The guidelines provide a 10 day window for the appraiser to complete the appraisal. Then the LAPP lender/underwriter will issue a CRV, Certificate of Reasonable Value. If the buyer is not working with a LAPP lender, the CRV will take a few days longer. Either way, you're still within a window of no more than 17 days or so. That's a time on which, in my experience, you can rely. When I refer a buyer to a loan officer, once the loan application is made, the contract in the hands of the loan officer, ask for a screen print of the VA appraisal order. See Appraisal Order below. Notice that the mortgage company is a LAPP lender, Lender Appraisal Processing Program. This appraisal was ordered on March 26th and received on March 31st at $5,000 above contract price with no conditions. I was sure the appraiser would condition the appraisal on installing a railing on the basement steps, but did not.

LAPP Lender Eligibility
Only supervised lenders and non supervised lenders who have been approved for the automatic authority by Central Office (262a) are eligible to apply for LAPP participation. Source: Office of Veterans Affairs.

2. VA LOANS HAVE TOO MANY "CONDITIONS". This is an often used excuse for discouraging a buyer who has VA eligibility. Seems to me that, if the VA appraiser is observing "condition" that involves safety or value, that those defects should have been remedied prior to listing a home for sale. The appraiser is providing the lender with a CRV, Certificate of Reasonable Value, meaning, if there are condition that affect the reasonable value of the property, they property is appraised for the value on the Appraisal Report as long as the "conditions" meaning defects are remedied. I have not found, over the years, that VA appraisers are more critical of property condition than appraisers for FHA financing. With low down payment conventional loans, low appraisals are not unheard of.

3. VA LOANS ADD COSTS TO THE SELLER. VA loans do not permit the VA buyers to pay for lender fees or termite inspections. That has never been a barrier to our buyers using their VA eligibility because

* The lender fees can be limited in the VA Addendum. We limit the lender fees to $500. If a VA approved mortgage company is charging more than $500 in lender fees, use another mortgage company. Too often buyers are attracted to low interest rates and don't understand that the high lender fees can add just as much to their closing. termite

* The termite inspections fee is only going to be $50-75 in my area. I just pay the dang thing when the termite inspection is done. Simple solution.

4. VA LOANS ADD TOO MUCH PAPERWORK. What paperwork?? One stinking piece of paper, the VA Addendum.

5. MY SELLER DOESN'T WANT TO SELL WITH A VA FINANCED BUYER. The seller doesn't want to or have they been advised by their listing agent that they shouldn't? If the seller/listing agent is fearful of a CRV for value, perhaps the property is seriously overpriced. Or, if the seller/listing agent is fearful of "conditions", perhaps some repairs should be made before listing the property for sale.

DON'T FORGET. The VA loan is a true ZERO DOWN loan up to the limit in your geographical ares.

DON'T FORGET. The seller can pay the buyer closing costs. In fact, the buyer can also pay down debts for the VA buyer. Talk to your lender about the limits. It's a LOT higher than you think.

This post inspired by a very interesting article by George Souto describing a transaction for a VA home buyer.

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail.

DOCUMENT BELOW REDACTED FOR PRIVACY OF THE BUYER/SELLER/LENDER.

VA Appraisal Order

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 04/22/2009 01:53 PM

Comments (67)

VA Loans in the Mortgage / Finance Channel

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Originally posted at: MD, VA Foreclosures, First Time Buyers Grants, CDA Loans MD, Rehab Loans MD & VA: VA LOANS - DON'T BELIEVE EVERTHING YOU READ OR HEAR.

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67 Comments on VA LOANS - DON'T BELIEVE EVERTHING YOU READ OR HEAR.

APR

Lenn,

Whatever works!!! Any port in a storm!!! Most programs are all vanilla anymore...not like years ago when some loans were extremely challenging...!!! Thanks, Fran

For years we did not use VA/FHA mortgages. I probably did my last one 20 years ago and here we are back again. Seems like we are just going round and round again.

I LOVE THE VA LOAN PROGRAM! Had one close yesterday and one is set up for this afternoon! Not a hitch with the program (of course I have awesome lender that knows the program well). No excess time at all! a seller would be crazy not to offer VA financing as an option in my opinion!

Jo. I agree completely. I love the VA loan. I also love the buyers that earned the entitlement.

Norma. Don't let folks talk you out of it.

Fran. Indeed. I just want to scream at some of the excuses folks use to avoid the VA loan.

Lenn, I agree- It makes my head spin (ala exorcist) when shen a listing agent says "the seller doesn't want to entertain a VA loan." I think, as you've said, it's ignorance . lack of knowledge, misguided perception on their part. Having a lender that it well versed in those loans is also paramount.

And my political leanings are pretty much mid-road, but hey, what about a little kindness for the people who've made an effort to serve our country!!???

Lenn -- one problem that still remains with the VA loan is that they will not allow the Buyer to pay any portion of the buyer agent fee. With discounted co-broke fees, the buyer is willing to pay the difference betweent he co-broke fee and the agents fee. We have some who offer on 1 or 2 apples to the buyer agent, and the fee is 2 1/2 apples. FHA got rid of this prohibition many years ago. I have had a couple of VA clients try to get the VA to make the change, but somehow the request gets lost.

I dont know much about VA loans but i have worked with other types of loans that have a bad stigma. I think that we owe it to our customer to give the best service that fits their needs, even if it means learning a new system or doing a little more work.

Joan.

I've had that come up twice over the years. I call the listing agent and tell them that I have a qualified ready to go VA buyer and will they kindly pay me 2.5% if I bring them a contract?

They agree so far. Fact is, if the listing is that low, no one is showing it anyway.

That could be a problem, but so far, not.

I have had very little experience with VA loans......some questions came up a few weeks ago, but that offer did not work out for other reasons. It sounds like a good deal to me.

What I feel I need to open my Buyers' eyes to on VA loans is the servicing fee. Each time they use the VA loan, the service fee increases...

Otherwise, you make good points.

Lenn - I do a handful of VA loans a year. If the sellers don't want to sell their home why is it listed? Va loans are only a big deal (and a good deal) for the deserving buyers. They should also be looked at as a good deal by sellers because someone wants to buy their house.

I do not see a probelm with VA buyers/loans. Having done one myself once, it was painless. A sale is a sale. Thanks for the info.

Lynn. We're heard that before. I immediately ask why? Then no matter what they say, we write it anyway.

Aaron. Describe what "stigma" you mean. I don't know about loan stigma.

Donna. If you mean the Funding Fee, that can be a hit, especially for a second time user at 3.3%. However, it can be financed and THE SELLER CAN PAY IT.

Ann. Talk to a good loan officer and have them explain it to you. It's simple and can be $0 Down.

Claude. I couldn't have said it better.

Gary. Great. You should be a good example to your VA buyers.

VA loans are great!

On all of my listings VA loans are included. I am surprised though that some people lock out a huge part of the buying pool by excluding these loans.

~~~ Aloha, Lana

Sherry. Agreed.

Lana. I just can't figure it. In many markets, the VA loan is the only 100% financing loan available. Yet, there are areas of the country where VA loans are just never done.

I can't figure it.

When I was 19i, and married (many moons ago) the VA loan was the way we managed to buy our first home, at $65,000. What a WAY to go! I am a strong supportre of VA loans! Thanks for clearing up a lot of smoke on that subject.

hey lenn

my first va loan here.....va loan is great for my client but it seems that the va condo approval process is what will be taking up most of the time. they have had the paperwork for over 2 weeks and it seems it's still just sitting on someone's desk. they said they will review it next week(so they say)

just hoping they approve the condo!!

Lenn: I remember the days when the VA loan was the only 100% program we had. It is still a great product and a good fit for many of our clients.

Yes I agree a VA loan may be the way to go for some. Why not try it! I always tell my people to keep their options opens. Nothing ventured-nothing gained I always say.

Patricia Aulson/Portsmouth NH Real Estate

Lenn, I'm always surprised how many of my Sellers mention to me they want to deal with VA or FHA. My response is always "Why not?" Of course it's because they aren't educated. The VA loan is an excellent product. And why in the world would anyone EVER deny the Veteran the opportunity to use this entitlement?

A buyer is a buyer is a buyer. And in this market we need every one of them regardless of the type of loan they use to buy their home.

Lenn, I love your straightforward way of separating fact from fiction. VA loans are a great way to go for those who qualify for them. What a shame that there are those who don't understand them discouraging their use.

Mark. Right you are. A qualified VA buyer is a very good buyer.

Bryant. Beats me. I believe that it's simple ignorance.

Patricia. Yes, it's a good loan for those eligible.

Sandy. In some areas, it still is the only 100% loan available.

Jane. I don't know where you are, but the condo has to be approved for VA and FHA loans, which usually means that it is 50% closed and the amenities are operating.

Carla. I believe I missed some points, but this is what I hear so often.

Maggi. There have been a few listing agents who say no VA contracts. Shucks, we write them anyway.

Lenn- We have very few VA loan buyers down here. So when there is one, the listing agents flip out! They have NO clue! It is not rocket science.

Lenn, we have quite a few VA loans here, being a military town. VA requirements have relaxed over the years and their appraisers are less stringent as well. Having said that, there are certain homes that are perfectly fine that won't pass a VA inspection - we had a buyer who wanted a darling little house that had been rehabbed but there was still some paint that had minor chips because of the age. The only solution would have been to sandblast the entire house. VA wouldn't pass it but it was a great guy and the rest of the rehab was very well done. The seller even repainted the house completely and sanded it but it was impossible to get rid of 100% of the paint. But 99% of the time, VA loans are a breeze!

Lenn, you did an excellent job of addressing this. It is amazing how many people try to twist things to discredit VA Loans. Thank you for the mention.

Lenn - thanks so much for posting. The VA loan (with the FHA loan) built the middle class. Sadly our industry ran the other way.......prior to 2 years ago, now just like FHA, everyone wants back in!!!!!! It's a great program and the extra paperwork or perception of being a tough loan is pure bull.

Anyway, thanks for sharing.

Cheers

Lenn,

Actually there are a couple more pieces of paper than just the VA contract addendum, but the point is right. It is just a few more signatures.

Generally anymore the eligibility is available quickly on line.

Thanks,

Richard

Nice blog. Too many time we forget to ask if the buyer as VA eligibility. I have found like you they are no more difficult to complete than some of the conventional loans.

OMG Lenn...I should have mentioned this to my client. I am just going to send a link to this post to him, thanks and a great post.

Lenn.... we are seeing way too many misleading blogs on AR and outside of AR when it comes to FHA, VA, and USDA loans... hey, I am not perfect, but it has a few of us very ticked off to say the least. If you aren't sure, do the proper research and stop spouting off opinion and not fact. And you can add another thing about VA loans... no monthly mortgage insurance. Damn, that alone is powerful.

jeff belonger

Lenn: Great post... I love VA loans.. They are not hard at all... Yes, there is the VA/FHA Addendum... The VA has to be sure the property meets guidlines... Nothing wrong with that.. They do insure the loan to the lender... And YES.. true 100# and no Mortgage Premium Insurance.

I have closed a VA loan in 12 days....from contract to closing..

APR

Hi Lenn, As I was reading this it occurred to me that I will flag it for featuring. I guess once again, I'm late to the party. Congratulations for the feature and for putting this together. It is excellent.

William. Thanks for thinking about the flag feature. I really want to get the word out about this. Folks in our industry are so slow to change. The nonsense we heard about VA loans 5 years are still being heard today.

Roland. Thanks for your experience here. Let's get the word out.

Jeff. I didn't add anything about monthly mortgage insurance because that's not one of the rumors that we hear. You should post about VA loans. You're more of an authority than I. This article was simply to dispel the excuses why agents don't recommend them.

Rebecca. One of the first questions I ask when a prospective buyer contacts me is "do you have VA benefits". A lot of them are inquiring about grants for down payment assistance. I tell them that, with the VA loan, they don't need any down payment assistance.

Terry. Good for you. I don't forget to ask that question. With no down payment loans so hard to find, the VA is a valuable benefit.

Richard. I don't know what more paperwork there is, our VA Addendum includes the termite/appraisal/matters and the financing addendum. There are more docs at settlement, but that's not what's keeping agents from helping VA buyers use their loan benefits.

Fred. Thanks for the support. IMO, any agent who discourages a qualified VA loan should lose their license.

George. Thanks for the inspiration. It happens that I have one closing on the 29th. I have appreciated the VA loan since I have been in this business. I remember when the interest rate/points were controlled by Congress. That was tough. But, so were all conventional loans back in the 80s.

Frank & Sharon. The rule for the "chipping and peeling paint" applies when the house dates back to pre 1978 because of the lead based paint matter. We have many communities built back in the lead based paint era. If the paint has been sanded and "feathered" and repainted, it has always passed for our buyers.

Katerina. With the higher VA loan limits, up to $1,000,000, I suspect that there will be more with conventional loans becomming harder and harder. If a listing wants to "flip out", just write it. An offer in hand needs to be presented to the seller and if they reject because of the financing, ask for it in writing. Ask in writing. That will scare the pants off of them. We went through this quite a number of times beck in 2004-2006 when listing agents just wanted to sell overpriced homes to buyers who didn't care what the value was, they just wanted a home.

My husband and I purchased our home using a VA mortgage many years ago. I always ask buyers "Have you ever served in our armed forces?" (You'd be suprised at how many former service members don't know that they are entitled to the VA mortgage benefit)

I love VA mortgages.

LOVE them.

Am currently working with a VA buyer now and the only thing I recommend to my buyers is instead of putting a 30 day close on the purchase agreement I like to use 45 days. As a VA appraisor has 2 weeks from date of receiving the order to go to the home, then another 2 weeks to return the appraisal to the lender, it can take an additional 2 weeks for the entire transaction.

Haven't had a seller balk yet at an extra 14 days to receive their money.

Good for you Kris.

The key to getting an appraisal in quickly is to request a copy of the lender's CRV order, which is why I put a copy of one in this post.

If your lender knows that there will be a written record of the ORDER date, they'll get the order out the day they get the copy of the contract.

I'm sure some lenders that I use think I'm a pest, but we get the job done.

Lenn,

Years ago a VA Loan was a pain! We didn't have lenders who had in-house VA appraisers and it went through a ridiculous process of having to go to another city..and it did take forever. Now it is a breeze! I've had the pleasure to represent several vets and they used their VA. Didn't take any longer and was done efficiently and on time. Even the sellers were pleasantly surprised. It's all in knowing how the system works and getting it started off on the right foot!

Dorie. Indeed. I firmly believe that agents discourage use of the VA loan when they don't know the loan.

That's an agent/broker failure and they ought to get a job and get out of this business.

Thanks Lenn, yes VA loans are becoming more popular especially with the low down payment group. Great program for today's market. I'm going to reblog this one.

The guidelines provide a 10 day window for the appraiser to provide the CRV, Certificate of Reasonable Value

This is a technical correction, Lenn. The appraiser, assigned by the VA, has ten days to complete the appraisal report from order date. The CRV is issued by either:

an underwriter from a LAPP lender
the VA's regional construction & valuation department

Either the LAPP lender or VA C&V issues those appraisals within 3-5 days. I bring it up because technically, releasing an appraisal contingency, in less than 17 days, isan unreasonable expectation. Pragmatically, I get VA appraisals within a week and a CRV within 2 weeks of the appraisal order.

Another home run from the Grand Slam Queen of Real Estate.

Lenn, we are doing a fair share of VA loans, FHA loans (of course) and USDA Rural Housing Development loans wirh rates as low as 1%! There are some great financing programs out there if buyers only look - and of course work with a reputable and knowledgeable agent ;-)

I agree Lenn - the VA loan process is not bad - it is worth using the process to sell a home...

Lenn,

Back in the stone ages (80's and 90's), VA loans were a nightmare. Six weeks to get a Certificate of Eligibility, or appraisal, or the form that stated the veteran had no outstanding school loan guarantees.

Sellers HAD to pay discount points, and most VA contracts were written as VA "No-No's", whereby the Veteran had NO downpayment...and NO closing costs. This meant HUGE outlays for the seller because not only did they have their normal costs associated with the sale of a home, but also were picking up lender's junk fees, discount points, the buyer's share of escrow, notary fees, recording fees, etc. AND many were being asked to pay all of the buyer's prepaids in order to effect the "No-No" option. Those deals were VERY expensive for the seller!! But those were the old days.

The problem is many real estate offices are being managed or trained by "old-timers" who vividly remember those days...and agents are being told that VA transactions are STILL time-consuming, STILL ridiculously expensive for sellers, etc.

They're not. Computerization and the internet has streamlined most of the processes, so six week delays are a thing of the past.

But they CAN still be expensive if you're not careful as a listing agent. You may get a VA-No-No offer even today, asking for the seller to pay EVERYTHING. Nowadays, though, the buyer can pay discount points, and heck, let the buyer pay their own prepaids (unless your price is such that it covers them). Lenn already addressed how to cap lender fees (kudos Lenn! I'll bet the lenders who try to get away with adding $1,200 in misc. processing and underwriting fees just LOVE you!! LOL)

Loan Brokers are going to hate me for this, but generally speaking, their "Misc. Lender Fees" are higher than a direct lender. That's because the wholesale company who's actually funding the loan has THEIR set of junk fees, and so does the mortgage broker. It's common to see broker's junk fees range well over $1,000....while direct lenders usually have them set at around $500-ish. Lenn's recommendation on capping those fees is an absolute MUST as a listing agent.

Lastly, in states that have escrow...the veteran is not allowed to pay that fee, nor notary and recording fees if I'm not mistaken, so take that into consideration too (seller must pay).

Oh geeze....one more thing. You'll be SHOCKED at how many older veterans are out there who have never used their entitlement...or used it once and believe they can't use it again (false). Make sure you ask all of your buyers whether they're veterans. It's surprising how many are eligible for a no-downpayment loan...but just don't know it!

Okay...obviously wayyyyy too much coffee for me this morning!!! Back to work now. :P

Dave

Brian B. Thanks so much. The technical things can trip us up. Correction made.

Christianne. There are loans out there, depending on the location and price range. We don't rely on buyers to do this reseach. We do it, too. I spend a lot of time looking for money for our buyers.

Kathy. BINGO.

David. What a wonderful comment. You covered things that I just didn't want to focus on in this post.

Yes, I recall when Congress set the interest rate/points and the seller had to pay. No matter, we still did them and the seller paid all of the closing costs too, if they wanted to sell their property.

What was so funny in those days was when Congress set the interest rates, as money tightened, the points would go up, often to 3-4 points. Then Congress would raise the interest rate and the points went back down to 1+0 and started working their way back up. When we'd see points go way up, we knew that the rate was going to go up soon.

I wrote a lot of VA loans in those days in the late 80, early 90s at 12%. Ouch.

Lenn: Thank you! It always amazes me when people assume rather than looking at it as another opportunity. We are in the business of helping people; it's nice to have VA as a part of our arsenal!

Paul. Indeed. It's routine for us with VA eligible buyers.

Lenn

I appreciate their service to our country.....let me be crystal clear about something................

A TRUE NO MONEY DOWN LOAN....THANKS TO THEIR SERVICE........THERE IS NO PMI.....

which increases their purchasing power and makes the home MORE affordable than the same exact home for an FHA buyer with 3.5% down but adding back PMI!

I run circles around any joke of a lender who says they're too much work....quite the contrary.....they're a joy to work with!

Phenomenal post!!! I hope more people listen.....

APR

Bill. Thanks very much. We have listing agents who blindly follow the lines about VA loans and we just ignore them.

I have found that if you simply write it, that argument fades.

LLENN

LENN- Thanks for posting this- with so many younger people in the Military, they are the next wave of homeowners who will want to use the benefits they EARNED serving our country and DESERVE for putting themselves in harm's way- the LEAST we can do is understand how these benefits will best serve them when they are trying to buy a home! Well Done!

Allison. The key is to not let them get away with them. Of course a seller can reject any offer they wish, but it's usually at the advice of their listing agent and I want them to tell me why.

ToulaRosebrock.com Hi Lenn:

You are absolutely right...

I remember my first few deals, were VA loans. Back then, they were a bit more difficult, but that's not the case any longer.

I guess the "mind set" of hearing VA, brings back those old memories.

Hey, I'm happy to promote a VA loan on an offer...

Toula. Good for you. The VA loan will help you sell homes.

VA loans can't be used on about 90% of what I sell. Mostly I sell second homes. It's a shame they can't use it for second homes. They can't even use it for a second home if a family member (for example child going to college) will be occupying the home. Shame I say.

Lenn - as a Navy veteran in a Navy town myself, I'm seeing a lot of my customers using their certificate. Heck, it's how I bought my first house 15 years ago. I'm happy to present this as an option to my clients. Thanks for clearing the air and providing us with an arsenal of objection handlers in favor of VA loans.

Cheers,

Tammy. That's indeed the case in many communities. However, the VA loan can be used up to $1,000,000. Of course they would need full benefits. Also, there is a 25% down payment of the amount over $729K.

Marvin. Indeed. Many more VA elegible active duty or formers of the armed forces would benefit if only agents would see the VA loan as possible financing.

Buyer with a VA loan? Bring 'em right on here to Tucson!

With any loan there are going to be conditions and requirements particular to whatever program is being used. It is our job as representatives of the buyer to communicate with the lender and understand what is coming up in the process.

If you don't know - get your ego out of the way and find out what your client's loan requires!

Anticipating & being prepared in advance is what separates the good agents from the ones that should be saying "want fries with that, dude?" on a daily basis instead of working in real estate.

APR

Kent. Indeed. Fact is, when a home is appraised with conditions, the agents usually blame the VA appraiser and not the seller who should have made the repairs before putting the property on the market. Or, the agent should take responsibility for not giving them good advice.

We, as agents and brokers, should not be in the business of trying to pass defects on to buyers.

Half of my market is in Virginia which is a caveat emptor state. So, the sellers and their agents simply believe that they can pass off the most awful defects to buyers. At least the VA tries to protect the buyer.

VA loans are a great thing. I purchased my first two homes using my VA loan eligibility after reinstating it after the sale of the first property.

We don't have as many VA loans here as some markets... I saw a lot more of them in the Dayton area when I sold there since they have an Air Force Base. I have worked with VA buyers in Columbus who had a tough time getting a house in contract because of misinformation. I've had an agent call me back later and admit he had given the seller misinformation that the house would not pass a VA appraisal, was the buyer still interested. Nope.

Information separates the ignorant from the wise. Your very appreciated and most informative post has saved some of the readership from remaining ignorant!

Diane. Thanks. Indeed. Let's get the word out. The problem with helping VA buyers is usually either the agent who doesn't know what they're talking about or a lender who isn't approved for VA loans.

Maureen. I hope you set her straight. That happens more often the folks know.

Scott. I'm closing one next Wednesday for a VA buyer using his Cert for the second time. We had to do some extra work because the first use had not been recorded as paid, but my buyers send the HUD-1 to VA and they issued him a new cert with full benefits. A minor glitch.

HOWEVER, he didn't know that part of his elegibility was still tied up. When I got a copy of his cert, you could have heard me scream a mile away.

JUN

Thank you for writing this, I can't tell you how challenging it has been to get an offer accepted for my buyer using his VA loan. I had an agent call me and ask me why didn't he use Conventional or Cash, when I asked was something wrong with the property or what reason he had, he just said it would be easier, I was so frustrated I wanted to scream. I can't believe how many listing/reo agents are specifying that they will not accept FHA or VA right now, it's ridiculous.

Miranda.

That old business about "more difficult" or "too much paperwork" is nonsense. One sticking piece of peper. Sellers often don't want them because the appraisals are a bit tougher, but they've lightened up quite a bit.

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