Veterans Have Earned The Right To Utilize Their VA Loan Benefit
Five years ago we created VA Loans Hawaii, Inc. to educate veterans, Realtors, and even other lenders about the VA home loan guaranty and changes to the program as they occur. VA loans offer some of the best terms for home financing available today.
First, let me state that veterans are members of our community who have made tremendous sacrifices to preserve our freedoms.
Unfortunately, there are still myths and misconceptions about how VA Loan programs work and, as a result, veterans’ offers to buy utilizing the VA Loan benefit are sometimes rejected.
Veterans and their families have given so much to earn the entitlement, that I believe we have an obligation to help them get on with their lives by allowing them to utilize it.
The basic problem in the marketplace seems to be lack of education about the benefit and overall ignorance of how it actually works. So let’s go over some of the myths.
Myth #1. VA has appraisers on staff who are more conservative than FHA or conventional appraisers.
First you need to know that VA does not have appraisers on their payroll. Appraisers are independent contractors who are also doing FHA and conventional appraisals. An appraiser’s opinion of value should derive from the comparable sales of similar properties in the subject proper-ty’s neighborhood. This practice is the same for every type of loan.
This myth was further expanded when the conventional and FHA lenders could choose their appraiser — they no longer have that option. Lenders are required to use appraisal management companies to assign an appraiser.
The lender is not allowed to have contact with the appraiser but only with the management company — thus further leveling the playing field with VA. So appraisals should no longer be an issue!
Myth #2. Sellers have to pay fees on behalf of the veteran buyer.
This has not been a requirement for at least the 8 years I have been in the industry. The seller CAN pay all or part of a veteran’s closing costs but is NOT required to do so. There are non-allowable fees a veteran cannot pay but that doesn’t mean the seller has to pay –Realtors can pay and lenders can pay.
It is our practice to waive lender VA non-allowable closing costs to the veteran, leaving only escrow’s closing fee and notary. Certainly these minor amounts should not be a deal breaker.
Myth #3. If an appraisal comes in short, a veteran cannot pay the difference and the seller has to drop the price or allow the veteran to cancel.
This issue is no different with a VA loan than with a conventional loan. If the sales price is $500,000 and the appraisal comes in at $490,000 there are various options.
The seller can drop the price, the veteran buyer can pay the difference, the seller and veteran buyer can split the difference, or, if no agreement can be reached, the contract can be cancelled. These were concerns of sellers back in 2005, 2006, and 2007 when veterans’ offers to purchase with the VA benefit were discouraged or flatly refused. Veterans were forced to use loan products that were inferior to VA Loans thus causing them financial harm.
Here are some of the benefits of a VA Loan.
*No down payment. 100% financing up to $741,250 in Honolulu County including VA funding fee; $625,500 in all other Hawaii counties. 1 to 4 unit residential properties are eligible.
*No PMI (private mortgage insurance). VA guarantees 25% of the appraised value of the home, so the veteran will not have to pay for PMI.
*Disabled veterans rated at 10% disability or higher are exempt from a funding fee.
*No prepayment penalties.
*Cash out refinances up to 90% of appraised value up to $741,250 in Honolulu County, $625,500 in all other Hawaii Counties.
So I ask my colleagues in the industry to keep in mind that the VA loan entitlement isn’t only about money, it’s about helping veterans to own a piece of this country he or she has defended.
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