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Loan Officers With Better Deals Than VA Are Probably Lying

By Randy L. Prothero

Real Estate Agent with eXp Realty 2021016812

February 06, 2008 08:24 PM

Strong words? I don't think so.

I have spoken to many Military folks who were steered away from using their VA benefits when buying a home. When a mortgage broker or an out of state lender tells someone with VA benefits that they have a better deal; it is probably better for the loan officer, not the borrower. Here are a few reasons why some loan officers have consistently pushed vets away from using a VA Loan:

They are not set up to do VA loans.
They can not charge the junk fees.
They do not make as much money on them.
They are not trained in VA mortgages.
They are dishonest.

On a rare occasion a year or two back I did see some loan programs that came close to VA, but none recently. I have a client who showed me his mortgage on a new construction home he bought 2 years ago. He was put in an ARM at a rate that was about the same as a 30 year fixed VA at the time. It has since gone up considerably. He had to come in with over $15,000 at closing; with VA it would have been less than $1000. He had mortgage insurance and a hard pre-payment penalty. With a VA he could have gotten in without a pre-payment penalty or mortgage insurance. Of course the developer did not allow him a real estate agent without having to pay for it out of pocket and they used the developer's lender.

In Hawaii the VA cap is $625,000 for 100% financing. The BAH (Basic Housing Allowance) is generous enough that most active duty soldiers can buy something with out tapping into their base pay or COLA (Cost of Living Allowance). Several of the loan officers will pick up the non-allowables so that the seller has no added costs.

One feature of a VA loan that is rarely mentioned is that it is assumable. VA and FHA loan are among the few types of loans that have this feature. Why is that important? If mortgage money tightens or interest rates climb in the future, properties with VA or FHA mortgages will be marketable when others are not.

So please remember if the loan officer says they have a better deal than VA, there is a strong chance that they are lying.

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Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Kris - I do a few a year with ex-military also. Good point, many of them have VA benefits.

Feb 06, 2008 09:12 PM

Jay McGillicuddy

Berkshire Hathaway HomeServices Verani Realty - Exeter, NH

Real Estate Broker

Good post Randy, we don't see a lot around here but I have done many in my day and it is worth it for the Vet.

Feb 06, 2008 09:24 PM

Neal Bloom

Brokered by eXp Realty LLC - Weston, FL

Realtor CRS-Weston FL Real Estate

Randy,

I assume when you are granted the VA benefits there is nothing better and they have the best assurance of the deal going through because of the qualifications.

Feb 06, 2008 10:10 PM

Gary L. Waters Broker Associate, Bucci Realty

Bucci Realty, Inc. - Melbourne, FL

Eighteen Years Experience in Brevard County

Good reminder, Randy. VA loans have good rates and are no more difficult to obtain....

Feb 06, 2008 10:42 PM

Frank Rubi

Frank Rubi Real Estate, LLC - Metairie, LA

FrankRubiRealEstate.com

Randy, thanks for bring this subject up. I agree that many don't want to deal with VA for what ever reason. It is a good deal for the vets. I say put your customer first. If you cant learn how.

Feb 06, 2008 11:38 PM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Jay - I am sandwiched between several military bases, so it is a way of life.

Gary - VA loans are actually easier to obtain.

Frank - I have little patience for loan officers and real estate agents who have not learned about VA. I recently had an agent of 40 years recommend to his clients not to accept our offer because we were using a VA loan. He spewed misinformation and I am sure he caused injury to many clients over the years.

Feb 07, 2008 03:37 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Neal - The requirements for VA are easier than most conventional loans. There is automated loan approval and the process is faster than most conventional loans. In our case the VA office is just down the road if we have any problems and I or our loan officer can call the head person directly. One more note 100% as you know it is going away except with VA.

I do not work with loan officers that do not have a full offering including VA. I want to be assured they are looking out for my client's best interest before I give them a referral.

Feb 07, 2008 03:47 AM

Steven Fishman

Independence, OH

Randy you make some great points. VA loans are one of the best products I offer. However, you fail to mention that if a borrower is looking to put down 20% VA is not a good product unless it is in a high loan limit area such as HI since they will get a JUMBO loan without any price hits. An for the assumption, one thing to caution FHA/VA mortgage holders with an assumption clause is that if the individual who assumes the note fails to pay it will revert back to the original note holder.

Feb 07, 2008 05:17 AM

Lynda Eisenmann

Preferred Home Brokers - Brea, CA

Broker Associate ,CRS,GRI,SRES, Brea,CA, Orange Co

Hi Randy,

Thanks for the info. I'm so embarrassed to say it's been decades since I've done a VA loan so I appreciate the info. In the beginning all is did was FHA & VA loans. The old FHA-203 B loans and the FHA 245 loans were a big deal at one time.

And you are so right about assumability, I don't that myself.

Feb 07, 2008 06:07 AM

Find a Notary Public needAnotary

QEC Internet Services - Long Beach, CA

USMC 71 - 73, Marines Barracks, Long Beach Naval Station, Long Beach, CA

Rifle No. 2742746

Semper Fidelis

Feb 07, 2008 06:17 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Steven - Our Jumbo loans are higher than the VA in Hawaii.

Lynda - If the lending side tightens up worse some may be glad to have assumable loans.

Ntsike - Thank you for serving our country.

Feb 07, 2008 10:47 AM

Steven Fishman

Independence, OH

Yes I am aware of the higher loan amount in your area. I assume you are aware that VA will now go up to 1MM loan amounts with 25% down at a conforming rate.

On a seperate note my step-son lives in Honolulu are you close?

Feb 07, 2008 10:54 AM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Steven - I am in Honolulu County. Our town is about a 20 minute ride from the City. I have not had anyone in the category yet. With 25% down they have many options.

Feb 07, 2008 11:14 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

The objections I've gotten over the years are not from lenders, it's from listing agents.

Unless a buyer had significant down payment money and would not have PMI, there is no better loan in this country than the VA guaranteed loan.

The objections that I have gotten in the past 5 years are really related to the fact that the VA appraisals are more difficult on overpriced listings, even when the listing agent doesn't admit it. DAH!!!!

They excuses I hear are:

The loan fees that can't be charged to the buyer. I overcome that by paying them myself.

The additional repairs that VA orders. Well, put a ((%$# railing on the stairway and it won't be a problem.

The fact is, the appraisals for VA financing must have hard comps to get the contract price and that is almost impossible in many areas.

Feb 07, 2008 12:25 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Randy, VA is the best loan program for any veteran that is a first time home buyer (VA loans can take advantage of the low interest rates that many local 1st time home buyer programs offer) and for any veteran that does not have 20% to put down. Less than 20% down and no PMI or FHA insurance is HUGE. If they have 20% to put down, then VA loans my not be the best deal.

Anyone who tells a veteran who does not have a 20% or more downpayment not to consider doing a VA loan, does not have the veterans best interest in mind, and is cheating him or her financially.

Feb 07, 2008 01:15 PM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Lenn - I did have problems with low VA appraisals in the past when the market was climbing, but we were able to challenge those successfully. I still get the occasional one where they want the buyer to make up any shortage in the appraisal. I do not know many buyers wanting to pay more than the property is worth, VA or otherwise.

George - I had a couple of loan officers try to sell other programs in the past. I had my buyer ask for a GFE and then had them get a GFE from a funding lender for a VA. You can guess what happened in each case.

My favorite was the loan officer who knew everything and said I was an idiot for suggesting a VA. He said I did not know what I was doing and should keep out of his business. (My client was not my business?) He just couldn't seem to get us a GFE. We got a GFE for a VA from a local funding lender and sent a copy to him. He got real angry and said, "I can't match that!" What a surprise.

Feb 07, 2008 02:22 PM

Sarah Nopp

South Sound, WA

Randy, There are often very good reasons to not use the VA benes. Primarily the funding fee. If it is someone's third VA loan, that can be a spendy little ticket! For the past few years, conventional was able to beat that almost every time.

Feb 07, 2008 02:23 PM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Sarah - I have not met on vet using it for the 3rd time. My experience has been that they have been talked out of using it in the past and still have their first time available. Even with the funding fee, if you look at the savings in escrow, lender fees and PMI, it is hard to beat. You can also fold the funding fee in the loan so they do not need the cash at closing.

Feb 07, 2008 02:28 PM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Randy.. I am slightly late to the party, but George basically said it all. Besides, you are preaching to the choir. It's the consumer that needs to read this. I had a client that was swayed to go conventional with 10% down and my payment was lower by $74. But she had a hard time believing me, because she not only had one lender tell her differently, but two.... and both weren't approved VA... gee, imagine that. But one thing... the loan officer not making as much on VA loans? I can make the same on a VA as on a FHA loan. The only difference is that there is 1/4 pt extra charge when doing a VA loan, which the loan officer can eat, if still making money on this.

Feb 07, 2008 02:29 PM

Randy L. Prothero

eXp Realty - Hollister, MO

Missouri REALTOR, (808) 384-5645

Jeff - You are right on the money, they probably couldn't do VA or they switched them because they can make more money on the conventional loan. This post is written more for the public.

The loan officers I work with pick up the non-allowables, which takes away any argument from the sellers.

Feb 07, 2008 03:15 PM

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