VA Loans and What You Need to Know About 'em
Recent data suggests that the number of buyers intent on using a VA loan for their home purchase are steadily increasing. However, home sellers and their agents seem to be limiting their potential by ignoring this sector of the buyer's market. Could it be because of the myths that surround home purchase through VA loans? Is it true that selling a home to a buyer with VA-backed loan is risky? Is the process tedious? This facts vs myth blog post will help you decide for yourself.
Eligible Buyers Love the VA Loan...
An article written by Inside Mortgage Finance notes that VA-backed loans are rapidly increasing and have overtaken the amount of loans taken through the Federal Housing Administration. Why is this so? It's because VA-backed loans are preferable from a buyer's perspective. Qualified applicants can purchase a house without down payment (with the premise of a particular loan limit) and no Private Mortgage Insurance (PMI) requirement. Therefore, eligible applicants would prefer to purchase with a VA loan over other conventional loan options.
...But Home Sellers and Agents Don't feel the Same Way
However, the very reasons why a VA loan is preferred by qualified home buyers are the actual reasons sellers and agents avoid them. It could be the thought of not receiving a lump sum in the form of down payment, or the risk of default that turns prospective sellers off, but those reasons are baseless especially since the risk of default is borne by the lending institution and not by the buyer. Data also suggests that there are lesser foreclosures on VA homes than on conventional and FHA mortgages.
Many sellers and agents shie away from buyers with VA-backed loans because of certain misonceptions or "myths". Here are the 3 most common myths about the VA loan and the corresponding facts that would set the record straight:
Myths vs. Facts
Myth 1: Processing a VA Loan is a slow and tedious process.
Fact 1: The Veterans Association of Real Estate Professionals (VAREP) states that VA loans close faster than conventional loans by up to two days. Closing times are generally comparable between VA and non-VA backed loans.
Myth 2: Eligible veterans are entitled for up to $36,000 and lenders will allow a loan of up to four times that amount ($144,000) without any need for down payment. Therefore, veterans cannot afford homes priced higher than that.
Fact 2: Veterans can actually add down payment money and qualify for higher loan amounts up to the limits of conforming loans (about $417,000 or higher in counties with higher than average home prices). Interest rates and loan conditions for conforming loans are better compared to conventional loans.
Myth 3: If there isn't any military base in your area, there wouldn't be enough qualified service members living nearby.
Fact 3: The National Center for Veterans Analysis and Statistics reports that there are 22 million combined veterans and active duty military in the U.S. The National Association of Realtors estimates that around 16.4 million of these service men have mortgage loans, with 12% of those acquired through VA loans. In short, there is a potential of 6 million veteran buyers, aside from those who hold non-VA loans who may make use of their VA-loan for a different home purchase.
There is no convincing data proving that transacting with buyers backed by VA loans are not qualified and/or would cause inconvenience in your home selling process. Therefore, VA-backed loan applicants should not be turned away from your list of prospective buyers. The DVA will assist them with their purchase, and you will get your home's worth in payment; please let this be a small token of reward for "The Brave" who have made our country great.
To know more about facts and myths about VA loans, you may access the original article from which this post was based here.