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The VA mortgage program accounts for around 10% of all real estate closings nationwide but is one of the most misunderstood programs by both Real estate agents, and sellers. We’re talking about 1 of 10 transactions, so it is no small number! Most Real Estate agents can work with buyers that have conventional and FHA mortgage approvals, but when it comes to the VA mortgage and VA buyers, there are a LOT of misconceptions out there Let’s look at the common myths, BUST THEM, and get right to the facts.
Myth #1 “VA mortgages are only for starter homes or first-time buyers”
FALSE – VA mortgages now have NO LIMITS on the purchase price, the only limit is based on the Veteran’s income.
I’ve done VA mortgages for $800,000 purchases, and the MacDill AFB near me is full of high-ranking, high-income Veterans.
VA mortgages can be used for high-end properties, as the ONLY limit is based on income - and MacDill AFB in Tampa has a MEDIAN Income of $106, 485 (which is 54% HIGHER than the national median income of $69,021 for regular “civilian” buyers) MacDill AFB is near my office in Tampa, but the same facts apply nationwide, around virtually ANY military base.
You have a base FULL of higher-than-your-area income earners, many highly skilled, with stable employment, that also move every 2-4 years – doesn’t this sound like a “dream” client for any Real Estate agent?
It’s time to get rid of the thought of low-paid, straight out of basic training service members, and look at the reality, you’ve got fantastic, high-income-earner, clients hiding in plain sight.
And as far as client loyalty is concerned, if you take care of ONE Veteran, you WILL get referrals.
Lots of them.
Ever notice how there’s a VFW post in every city? And American Legion?
Veterans stick together, and if you take care of one, you take care of them all. (Just don’t screw one over, because this also works both ways!)Myth #1 “VA mortgages are only for starter homes or first-time buyers”
FALSE – VA appraisals take the same amount of time as any other appraisal, and are in fact EASIER than FHA appraisal requirements, and very much like conventional appraisal requirements.
I’ve had exactly ZERO issues with my VA appraisals, even during COVID lockdowns.
If you have a decent, safe, livable home, it will generally pass the VA appraisal inspection.
I’ve seen far more problems with FHA appraisal inspections, yet agents and sellers still hold unfounded beliefs about VA appraisals.
As far as the time required for the VA appraisals, it USED to take longer, but that issue is in the past.
My VA appraisals arrive on my desk just as quickly as any other appraisal – that's fact.
“VA Mortgages take a long time to close”
FALSE – VA mortgages close just as fast as conventional and FHA, and sometimes faster, as the VA guarantee makes the VA mortgage very attractive to the lenders – it's virtually risk-free lending!
30-day closings for VA are normal, and in a rush, I've seen 15-day closings.
The VA mortgage is also guaranteed, and this also makes it attractive to lenders Lenders hate risk and LOVE guarantees, especially government guarantees.
VA mortgages are guaranteed by the U.S. Government, for the first 25% loss in the event of a foreclosure.
Because the average foreclosure results in about a 20-30% loss to the lender, the VA guarantee makes VA mortgages virtually RISK-FREE for lenders.
This means fast approvals, and fast underwriting turn times, which means your VA buyers will get to the closing table FAST as well.
“VA Mortgages require great credit”
FALSE – VA mortgages require NO MINIMUM FICO SCORE, and a score as low as 580 is accepted all day long by most lenders. Why? Because the VA guarantee makes the VA mortgage very attractive to the lenders – it's virtually risk-free lending!
It’s also important to know that the VA does NOT loan the money, lenders do.
Lenders set their own credit score guidelines, because there is NO minimum credit score required by the VA.
I’ve got lenders that go all the way down to a 500 credit score, and most large national lenders will accept scores down to at least 580. Where else can you get $0 down with a 580 credit score?
The VA mortgage is the only mortgage out there with 100% financing for 580 credit scores! (And down to 500 is acceptable as well)
“VA Mortgage Insurance is expensive”
FALSE - VA mortgage insurance is only charged once, upfront, and can be financed into the loan amount. And it’s waived completely for Veterans with a 10 % or higher disability rating.
In my experience around 50% of my Veteran clients have at least a 10% or higher disability rating – so at least half of your Veteran buyers won’t have ANY funding fee whatsoever !
VA also allows the funding fee to be financed into the loan amount, so it is a true $0 down payment program.
Compare this to FHA, where the upfront insurance is mandatory, and charged every month, which affects the FHA qualifying amount.
The Bottom Line
Real Estate Agents and Sellers should welcome Veteran homebuyers with open arms, for a number of reasons.
Agents benefit from the VA mortgage guarantee, knowing that the offers they present to their sellers are solid, if they're backed by the VA.
Sellers can open up the listing to offers from another group of solid buyers, that make above-average income, by asking their agent to add VA financing to the listing.
Lenders benefit from knowing the VA guarantee will protect them from any potential loss on the loans.
And Veterans benefit from the VA mortgage program, getting $0 down payment mortgages and lower than market interest rates – even with credit scores as low as 500!
