WHAT YOU NEED TO KNOW ABOUT VA LOANS
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If you are helping a VA buyer or reviewing an offer from a VA buyer, there are a few things you should know about VA loans. Contrary to popular belief, they aren’t hard to get approved and they don’t take forever to get closed. They are actually a very helpful way for veterans buy a home. We’ve seen plenty of successful closings in 21 days.
Understanding how the process works and how it affects the escrow process can help take some of the confusion out of the process.
The VA Appraisal
The largest misconception many agents have is the trouble they think they will have with a VA appraisal. If the home is in good condition, you have nothing to worry about. The appraisal is truly the same as any other lender/loan program would require. The one difference is the Minimum Property Requirements (MPR). The name might sound intimidating, but it’s really just a way for the VA to make sure the home is safe, sanitary, and livable.
Basically, if the home is in good condition you will be okay. If all electrical and plumbing systems work, the roof has at least a few years left on it, the paint is good, and there aren’t any visible hazards, the home will likely pass the MPRs. Don’t confuse the appraisal with an inspection. While the VA appraisal is slightly more in-depth than a regular appraisal, it’s not nearly as detailed as the home inspection.
Lastly, lenders place the appraisal order directly with the VA which then assigns an appraiser. Timing can vary, but the VA does publish their turn-times.
Many mistakenly think that VA borrowers are risky because they borrow 100% of the purchase price. They worry that the borrower will get turned down at the last minute and the seller will be left back at square one.
Just like any other loan, veteran borrowers must still qualify. While the underwriting requirements are a little flexible, they definitely help weed out the borrowers that truly cannot afford the home. In fact, because of the 100% down payment, sellers are almost in a better position because they know the borrower will have the funds. There aren’t any down payment funds the borrower needs to come up with. It’s wise to confirm proof of funds for closing costs.
If you are at all concerned, request a fully underwritten pre-approval from the lender. This is more than just a standard preapproval and is more solid than desktop underwriting (DU) results. In a full underwriting review, review the underwriting conditions. The conditions should be only items relating to the property and not the borrower’s credit, income or assets.
Sellers Don’t Have to Pay the Veteran’s Closing Costs
Many agents believe that the seller must pay some of the buyer’s closing costs. This is just not the case! During negotiation, the seller may still agree to help, but it’s not required.
Pest/Termite Report—What’s Required?
In California, a pest/termite report and clearance are required by close of escrow. Clearing all section 1 items is mandatory. For section 2 items/other items/items for further investigation, this is really an underwriter’s call and you should be ready to address at least the items that involve water.
In the end, it pays to open up your possibilities to VA borrowers. The market is filled with veterans that want to use their VA benefit. The program has come a long way and is right on par with many other programs. The loan doesn’t take any longer to close than any other loan program – the VA doesn’t even get involved in the approval process.