Zero-down-payment VA loans are a great option, but if your real estate agent isn’t on board, you could face resistance. Working with an agent who knows the VA loan process is just as important as a relationship with an experienced VA lender.
U.S. Coast Guard Veteran Bryan and his wife Bridget dreamed of a home of their own. They chose a VA lender and got their certificate of eligibility. With good credit and ample income, they were pre-qualified for a VA loan. They had picked out the home of their dreams, but when they went to make the offer, they didn’t get the “thumbs up” they were expecting from their real estate agent.
Ellie, their agent, recalls, “They told me that they would like to get a VA loan. I made a terrible face and said, ‘Oh, I don’t know if that’s a good idea.’”
Ellie’s concern? Rumors. Ellie had never done a transaction that involved a VA loan and she had heard some of her colleagues mention bad things about the program. Among other things, she was told that VA loans take longer to close.
Bryan and Bridget’s story of their transition from renting to first-time homeownership tells an all too familiar tale. Some real estate agents are just not as familiar with the VA loan process as others. This lack of knowledge can deter an eligible Veteran from using their benefit.
Education and good understanding between the lender and the agent are vital to getting the most out of the government-backed program. Bryan and Bridget’s loan officer, Shirley, went to work dispelling the myths and highlighting the benefits of the program to help make Ellie more comfortable. Ultimately, Ellie had a change of heart for VA loans.
Here are some of the common topics that should be covered when a real estate broker, home seller – or anyone for that matter -- is unfamiliar with the program. As Shirley shared with Ellie during their phone call, “I’m not taking you down the yellow brick road here. I’m telling you what the VA loan program can do.”
What Makes VA Home Loans Unique?
Federally-backed VA loans have helped tens of millions of Veterans, active duty, surviving spouses and eligible government employees finance their homes. Some of the key advantages of the mortgage program include:
- No down payment required on purchases up to $417,000 (and higher in certain counties)
- No private mortgage insurance payments (PMI)
- Competitively low interest rates
- No pre-payment penalties
- Fees regulated by the VA
- Up to all closing costs and up to 4% concessions may be paid by seller
Potential for No Down Payment
The top reason most Veterans choose this program is for its no-down-payment option. In other words, 100% of a home’s purchase price can be financed. In 2013, 89% of those who used their VA loan benefit to purchase a home made no down payment. Programs that offer 100% financing are rare. And for many who’ve earned military home loan benefits, the option to pay nothing down (provided the veteran qualifies for the loan amount) can mean the difference between renting and owning.
The New and Improved VA Appraisal Process
Among the rumors Bryan and Bridget’s real estate broker heard was that the VA appraisal takes longer. In fact, new data shows quite the opposite. According to 2014 VA annual stats, VA appraisals are faster than conventional or FHA loans. Speed can be attributed to two factors. The first is the implementation of the automated Appraisal Management Service (AMS) functionality. AMS has standardized the appraisal review process and reduced cycle times. Second, the VA has increased the number of bodies for dispatch by more than 2,000 certified appraisers since 2012. As a result, VA now leads the industry in appraisal speed.
VA Loans Close Fastest
VA is not just leading the industry in fast appraisals. It’s also claiming the #1 spot for quickest closings. According to the 2014 Ellie Mae Mortgage Originators Insight Report, VA loans close faster than any other loan type in the industry. Check out these averages:
|Loan Type||Days to Close|
|Conventional (20% down)||39|
Individual closing times can vary based on a number of factors. But, the average times in the table may be useful in weighing your options.
One of the biggest concerns Bryan and Bridget’s agent had was the amount of cash the couple had to put down. The thinking was that, with 100% of their offer contingent on financing, the military borrowers could not compete for a bid. After talking to Shirley, the couple’s experienced loan officer, Ellie saw a whole new point of view. A zero-cash-down payment means one less step for qualifying. While conventional and FHA borrowers need to show their down payment liquid, VA borrowers do not.
A pre-qualification letter gives the initial “green light” to proceed with the zero-down-payment loan. Bryan and Bridget had their letter, and in the end, they were approved.
Today, Bryan and Bridget (pictured above) are living the dream, thanks to good communication between their real estate agent and their VA lender.
NEXT STEP: To learn more about VA home loan benefits for first-time homebuyers, click here to connect with an experienced VA mortgage specialist.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender