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A vendor declined my VA mortgage provide. What can I do now?

Are VA Loan Offers Bad For Sellers?

You have found your perfect home. But the seller rejected your VA loan offer on the grounds that VA loans are too troublesome.

That seems to be happening more and more often. And yet there is no good reason for it. Because VA loans are just as good for a seller as any other type of mortgage.

This is because some sellers – and even their agents – have misunderstandings about the VA loan program that make them reluctant to take up VA offers.

In this article, we're going to explore these myths along with the best ways to negotiate and get your VA offer accepted.

Check your VA loan eligibility. Start here (11.10.2021)

In this article (continue to …)

Why Don't Sellers Like VA Loans?

Many sellers – and their real estate agents – do not like VA loans because they believe these mortgages make it harder or more expensive for the seller to close.

But these problems are largely myths that come from the past. VA loans have changed a lot in the past few years and are generally no more difficult or expensive for sellers than any other loan.

The most common myths are that VA loans:

Close less often than other types of mortgages

None of that applies today.

The data for 2021 shows that VA loans last, on average, only a few days longer than traditional loans. And the notion that sellers have to pay closing costs for VA buyers is simply wrong.

In short, there is no reason a seller should turn down your offer to buy just because you are using a VA loan. But due to misinformation, some might anyway.

So what can you do to get your offer accepted?

Check your VA loan eligibility. Start here (11.10.2021)

6 Tips to Take on Your VA Loan Offer

There are a number of steps you can take to get your VA loan offer accepted – even by a cautious seller. But it does take some planning and negotiation.

Here's what to do.

1. Get the right buyer rep

Start by hiring a buyer rep who is really experienced with VA lending. This broker will serve your interests for free (the seller almost always pays all brokerage fees, but be sure to check when you appoint your broker).

When the agent comes to make you a VA loan offer, it can destroy any false beliefs about VA loans that the seller and the seller's agent might have.

Meeting your salesperson in person will help avoid problems later by discussing how the VA Loan works. Yes, it offers exceptional privileges to buyers. But the mortgages are 100% legitimate, government-sponsored loans. And you have earned each of these privileges through your service to your country.

2. Find a responsive lender

Choose your VA lender carefully. Yes, you want a lot on your mortgage. But it helps to have a loan officer who is happy to take calls from agents. Ten minutes on the phone with a loan officer can turn a broker from a VA loan skeptic to an attorney for him – and you -.

Some suggest that using a local lender or broker can help. Because listing agents have greater affinity with people they may meet in person. But you don't end up paying a much higher interest rate and closing costs than necessary just to keep your loan local.

3. Make a larger deposit if possible

Some sellers and listing agents freaked out at the idea that VA loans don't require a down payment. They assume you are not a serious homebuyer unless you give up 3% or more.

This is of course rubbish. However, if you have ample savings or are a repeat buyer with sufficient equity, you may be able to avoid this prejudice by paying an excessive down payment. And it could increase the chances that your VA loan offer will be accepted.

4. Avoid contingencies

Your seller will almost always find your VA loan offer more attractive if you can forego some or all of the eventualities. And that might be enough to break any prejudice against VA loans.

Eventualities are usually written in offers to buy. They list the events that must be met for the deal to proceed. And they are an important safety net. Because if you withdraw from buying a home for reasons not contingent upon you, you are likely to lose your serious deposit.

So don't forego contingencies unless you are sure that you can continue with your purchase no matter what. And discuss it with your buyer's agent before signing anything.

5. Wait for the market to cool down

Any prejudices against VA loans are only compounded by the current hot real estate market. Sellers typically receive multiple offers, often above the asking price, and have the luxury of being able to choose and choose. When they have just one inkling of a doubt, they move on to another.

But at some point the market will cool down. And given your VA loan offer, a seller is far more likely to take it seriously.

We don't suggest you wait. Both home prices and mortgage rates could have risen if the market cools that much. And by then, you may not be the kind of home you can currently afford.

So our best advice would be to hold on and take every failed offer on the chin. However, if you are in a good position to wait and you don't mind, you may have better luck with your VA loan offer.

6. Use a different loan program

Some VA loan buyers are so frustrated with repeated failed purchase offers that they are considering switching to a different type of mortgage. But don't rely on it to solve the problem.

At the time this was written, people with all sorts of mortgages had to write a lot of offers simply because the competition among homebuyers was so great. And even cash buyers with no contingencies sometimes missed deals.

However, when your frustration turns to desperation, one option is to try a different type of mortgage.

You will likely need a 3% down payment and 620 creditworthiness. But then you could get a conventional Fannie Mae or Freddie Mac mortgage.

However, your mortgage rate would likely be higher than a VA loan. And only those with VA loans or 20% down payments will avoid ongoing mortgage insurance premiums. So your monthly payments will likely be significantly higher without a VA loan.

Of course, you can quickly turn your Fannie or Freddie loan into a VA loan. But then you pay the closing costs for two transactions, not one. And those that average 2 to 5% of the property's value are likely to be tens of thousands of dollars in your sights. So this is only a last resort for the really desperate.

Common Myths About VA Loans, Broken

If you want to understand why a seller turned down your VA loan offer, and hopefully prevent another refusal, it helps to understand why the seller and agent may be biased towards these loans.

Here are four common myths about VA loans in the market today – and why they are not true. Knowing this, you may have a better chance of getting your next VA loan offer accepted.

Myth 1: VA loans close less often than other types of mortgages

One myth about VA loans is that they are harder to close than other types of mortgage. This could be scary for sellers who fear the sale will fail if the borrower does not get funding.

In reality, however, VA loans close at almost the same interest rate as traditional loans – and at a slightly better rate than FHA mortgages.

According to ICE Mortgage Technology data as of July 2021 (most recent at the time of writing):

About 79% of all home loans close77.7% of VA purchase credits close79.4% of conventional loans close 76.6% of FHA loans

So there is always a small risk that a mortgage will be turned down at the last minute. However, this risk is not significantly higher with VA loans than with other types of home loan.

Myth 2: VA loans take forever to complete

The same report measures the average number of days it takes to get a mortgage. According to the data, it sometimes takes a little longer to close VA loans. But the emphasis is on "easy".

From January to July 2021, the average times to take out a home loan were as follows:

VA loan – 55 daysConventional Loan – 49 DaysFHA Loan – 55 Days

A VA loan takes on average only about 6 days longer than a conventional mortgage. And if you're coming up with a competitive offer on a home – especially if it's the best deal on the table – those 6 days shouldn't be a huge problem for most sellers.

Myth 3: VA credit ratings are slow and undervalued homes

Regardless of the type of loan, appraisers have exactly the same goal: to determine a fair market value for the home. And that is exactly what their professional duty is to do. Anyone who routinely underestimates real estate is wrong and should not expect permanent job security. Again, the type of mortgage does not matter.

As for the VA reviews, which are taking longer, there may be a grain of truth in them.

Says Veterans United, "The appraiser is summarizing the comparable sales and property condition information in a report that is uploaded to the VA's secure web portal on average within 10 business days, although this may be more or less depending on where you live and other factors."

But there is an additional step with VA loans. Because the appraisers' reports have to be checked either by a specialist employed by the lender or by the VA itself.

That is basically a good thing. Because rogue appraisers should be quickly exposed and rogue appraisals corrected.

Does it add more time? Maybe. But the “Days to Complete” data in the previous section clearly shows that reviews don't hold things up much.

Myth 4: VA loans require sellers to cover all of the buyer's closing costs

VA loan borrowers have no more power to compel a seller to pay their closing costs than any other homebuyer.

In a buyer's market, buyers routinely include closing costs in their negotiations. But such buyer's markets are currently rare. Thus, few homebuyers can convince sellers to pay some or all of these costs. And that also applies to VA loan offers.

It is true that certain closing costs cannot be paid by a VA borrower. But the lender usually absorbs this.

Of course, in some states it is common practice for sellers to cover buyers' closing costs. So this is not an issue at these points.

Yet this myth proves to be persistent. A loan officer wrote to HousingWire in August 2021 to say, “I still get calls from brokers to this day asking if it's their seller Committed Closing costs to be paid. So there is still a huge misunderstanding out there.

They continued, “I try to educate my agents about this as often as possible, but I think this is one of the reasons veterans are so often overlooked. The agents or salespeople who don't bother to call are sure to be overlooked by the veterans. "

This underscores the importance of choosing a buyer representative who is also a VA loan expert.

If your realtor can dispel some of these myths at the time of bidding, you may have a much better chance of getting the home you want.

Check your VA loan eligibility. Start here (11.10.2021)

Frequently asked questions about buying a home in VA

Can a seller discriminate against a VA loan?

In short, yes. There are many laws in place that forbid discrimination in housing for many reasons. But none of them cover types of mortgages. A seller may therefore prefer an offer with a different type of mortgage, such as a conventional loan, to a VA loan if so desired.

Are VA Loans Harder For Sellers?

Not really. They used to be harder, but the VA relaxed a lot of the rules that made it harder for sellers. Now the idea that VA loans are much longer or more expensive for the seller is just a myth.

Does it take longer to take out a VA loan?

On average, VA loans take a little longer to close than traditional loans – but only around 5 or 6 days. And the process will be faster for some VA buyers.

Do VA Loans Cost More For Sellers?

Absolutely not. Sellers do not pay any of the buyer's mortgage charges unless they CHOOSE to cover closing charges.

Do Sellers Pay Closing Costs on a VA Loan?

Not by default. A seller would only pay the buyer's closing costs if they consented to it – and that usually only happens in the buyer's market (for example, when the seller is having trouble moving the house and needs to add an extra incentive). In today's strong seller market, it is very unlikely that a seller would pay the buyer's closing costs.

What do sellers have to pay for a VA loan?

Nothing. Some VA loan completion costs may not be billed to the buyer. But nowadays, lenders usually access this tab.

Are VA Reviewers Lowball?

You certainly shouldn't. It is the job of all appraisers to determine the market value of a home – regardless of the mortgage. And we haven't seen any evidence that those who rate homes for VA loans deviate from it.

Are VA Loans Harder To Close?

Not really. There is only a few percentage points difference between the default rates of different types of mortgage applications. And VA loans are usually somewhere in the middle.

How strict is a VA home inspection?

There is no specific VA home inspection. However, the VA rating is a bit stricter. Appraisers have a longer checklist of minimum real estate requirements (MPRs) for VA loans than for some other types of mortgages. These requirements protect VA borrowers from buying a home that is not safe, hygienic, or structurally sound. And they are seldom a problem for those buying modern mainstream homes in good condition.

What should I do if a seller declines my VA loan?

If the seller rejects your VA loan offer, it may be too late to do much. The chances are good that another offer has already been accepted. Above, we list a few ways you can improve your chances of your offering getting a fair hearing. You start out by finding a buyer rep who is knowledgeable about VA loans and a lender who is easily accessible to brokers.

The bottom line

It is an unfortunate reality that some sellers are biased against VA loans. But there is no reason for it.

The best thing you can do in this situation to get your VA offer accepted is to work with a real estate agent and lender who is very knowledgeable about VA loans and can help you get your offer through to completion

And keep trying. The housing market is tough for everyone right now and it will likely take several tries before your offer is accepted – VA loans or not. So keep your head up and stay tuned to land your dream home!

Confirm your new plan (October 11, 2021)

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