Supporting veteran homebuyers starts with understanding how to navigate their unique benefits and set aside misconceptions about VA loans. Those misconceptions are common among buyers, sellers and listing agents and can create friction in the transaction process. Veterans Day is a good time to reflect on how real estate practitioners can better support veterans in the homebuying process and help them avoid missing out on their benefits.
Separating VA Loan Facts From Fiction
The VA Home Loan Guaranty Program is a mortgage program created to help eligible veterans, military members and surviving spouses purchase, repair or build a home. Buyers must meet service eligibility requirements and obtain a Certificate of Eligibility confirming their eligibility for the benefit. They must also meet their lender's credit and income requirements.
Even with a COE in hand, sellers sometimes reject veterans' offers because of misconceptions about VA financing. Real estate agents can best support their veteran buyers by understanding those myths and combating them with the facts:
"VA loans take much longer to close than conventional loans": A VA loan can take a few days longer, and the VA appraisal may be one reason. The VA sets appraisal turnaround requirements by county. A home that needs repairs to meet the VA's standards can slow things down, too. To help prevent delays, discuss the appraisal timeline with the lender and request the appraisal promptly after the offer is accepted.
"VA appraisals are stricter": In some ways, yes. The appraiser checks that the home meets the VA's Minimum Property Requirements, which address safety and structural soundness. Agents should watch for visible concerns, such as exposed wiring, signs of water damage or deteriorating paint in homes built before 1978. Identifying potential issues during showings allows buyers to discuss repairs with sellers before submitting an offer. If the appraiser believes the property may be worth less than the purchase price, the VA's Tidewater process provides an opportunity to submit additional market data before the appraisal is finalized. If the final value is still too low, the buyer can request a Reconsideration of Value, renegotiate the purchase price or pay the difference. The VA escape clause also allows the buyer to walk away without forfeiting earnest money because of a low appraisal. In certain circumstances, veterans can request a waiver of required repairs, subject to VA approval.
"Sellers should favor cash or conventional offers over VA offers": A VA buyer goes through a loan qualification process just like any other buyer. When submitting an offer, attach the buyer's preapproval letter and communicate with the listing agent about the financing. Explain that the loan is partially guaranteed by the VA and address any concerns about the appraisal or closing timeline. This helps sellers evaluate the offer based on the buyer's qualifications and the transaction terms rather than assumptions about VA financing.
Understanding the VA Loan Advantage
VA loans offer buyers advantages that are not available through many other financing options. For example, eligible VA buyers can purchase a home with no down payment, provided the purchase price doesn't exceed the home's appraised value and they meet their lender's requirements. Conventional loans typically require private mortgage insurance when buyers put less than 20% down, but VA loans don't require it.
Another advantage is that eligible veterans can use their VA home loan benefit more than once. Agents should encourage buyers who have previously purchased a home with VA financing to check their remaining or restored entitlement rather than assuming they no longer qualify.
Most VA buyers pay a one-time funding fee, which varies depending on factors such as their down payment and whether they've used the benefit before, but typically falls around 2.15% off the loan. Buyers can pay the fee at closing or add it to the loan. Some veterans, including those receiving VA disability compensation, are exempt.
Sellers can also contribute toward the buyer's funding fee. The VA limits certain seller concessions, such as paying the funding fee or prepaid expenses, to 4% of the home's VA-established reasonable value. Standard closing costs generally don't count toward that limit, so sellers may contribute more than 4% toward the buyer's total expenses.
It's also important to understand that qualifying for a VA loan works a little differently. While conventional lenders often use credit score thresholds and debt-to-income ratios to qualify borrowers, VA financing includes an additional consideration. The U.S. Department of Veterans Affairs doesn't set a minimum credit score, although individual lenders can establish their own requirementspdf. That means a buyer can meet the VA's requirements but still fall short of a lender's standards. Lenders also evaluate the money borrowers have left each month after paying major expenses, known as "VA residual income."
How Real Estate Practitioners Can Better Support VA Buyers
The more practitioners know about VA loans, the better equipped they are to advocate for their clients. When representing a veteran buyer, agents can help strengthen an offer by providing a lender's preapproval letter and communicating with the listing agent about the buyer's financing. If a seller expresses concerns about VA appraisal requirements or closing timelines, explain how the process works and address potential obstacles early.
Agents should also explain the importance of an independent home inspection. Although VA appraisers evaluate whether a property meets minimum property requirements, they don't conduct the comprehensive assessment of a home's condition that a buyer would receive through an inspection Talk to buyers about an inspection so they can better understand the property's condition before moving forward.
Partnering with loan officers and mortgage brokers experienced in VA financing can also help agents anticipate potential challenges. These professionals can clarify eligibility questions, explain funding requirements and help resolve issues before they delay closing.
When agents understand the VA loan process and address misconceptions with sellers, VA-backed offers have a better chance of receiving fair consideration. Veterans can take advantage of the homebuying benefits they've earned, while sellers gain access to another pool of qualified buyers.
