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  • Michelle Plunkett

NEW & IMPROVED VA HOME LOAN PROGRAM (Part 2, Four Misconceptions)

As we shared in Part 1 of this post, the VA home loan program has drastically changed thanks to the “Blue Water Act” passed in 2019 which became effective January 1, 2020. The surprising thing is that even though this newly improved VA Home Loan Program has been if effect for some time, many of our well-deserving veterans, as well as many real estate professionals, do not seem to know much about these improvements.

Don’t miss the four big benefits outlined in Part 1 of this post. Here, we will focus on four common misconceptions surrounding this program.

Misconception 1

In the past, sellers and their agents may have hesitated to work with a buyer that pursued VA home financing. Such hesitations arose because of longer underwriting processes as compared to traditional mortgages. However, while the fears may continue to exist today, such fears are not rooted in reality. VA loans do not always have a longer close of escrow date. A strong buyer, combined with fast turn times, allow VA funding to conform with standard close of escrow dates as set by the contract. Since many real estate professionals themselves are unaware of the smoother VA underwriting process, you may have to educate those involved in the transaction in order to alleviate seller concerns.

Misconception 2

There was a time when sellers and their agents feared complications during the appraisal process which could result in cancelled escrows. These difficulties arose due to health and safety issues identified by the appraiser that needed repair before the close of escrow. However, these health and safety issues can be paid by the buyer or negotiated within the purchase contract preventing escrow from falling out. As a note, however, the VA financed buyer can not actually waive their appraisal contingency under the contract. While this risky practice has become more common due to very competitive markets, a VA buyer is not allowed to waive this contingency. There is still flexibility here though since the buyer is is allowed to cover any appraisal shortfall. This ability can keep a deal together as long as the buyer is willing to put in the needed additional funds.

Misconception 3

Another misconception is that sellers will be stuck with any and all termite costs at the close of escrow. This is just not true as the allocation of these costs are negotiable. The termite report and clearance items can be paid by the buyer or by the seller. However, a termite clearance report is required before the lender will fund.

Misconception 4

Contrary to common belief, the seller does not need to subsidize the buyer's closing costs. VA funded buyers can pay up to 1% of their loan amount or purchase price in closing fees including seller mandatory fees. This allows sellers to move forward with strong buyers while avoiding extra fees at closing.

While some of these solutions may, on the surface, sound more like seller benefits; these items benefit the buyer in that the buyers are less likely to be passed over by sellers in favor of non-VA financed buyers that would otherwise look less risky, less complicated, and provide more to the seller's bottom line.

Contact Team Plunkett to discuss how this impacts you and your family!

Note that while we are not mortgage brokers ourselves, our goal is to make you aware of these powerful benefits so that you have greater opportunity and flexibility when buying your next home or even refinancing your current mortgage. Contact us for a lender referral to help you through this process in detail and get you qualified you for your new mortgage. Once you are pre-approved, we can help you find your next home!

Plan your next move now with Team Plunkett!

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