VA Home Loan Video Part One: VA Loans 101 - Transcript
Featuring 2022 National Association of REALTORS® President Leslie Rouda Smith, and John E. Bell III, Acting Executive Director of the Department of Veterans Affairs Loan Guaranty Service.
Hello! I’m Leslie Rouda Smith, 2022 President of the National Association of REALTORS®. We’re pleased to present this two-part video series on the VA Home Loan Guaranty Program to help our members navigate the process and maximize its benefits for their clients.
With me today is John Bell, Acting Executive Director of the Department of Veterans Affairs Loan Guaranty Service. In December, John and I had the privilege of testifying before Congress on the VA home loan program. I was pleased to share our members’ perspective on what’s working and propose solutions to increase awareness of VA home loans for those who have bravely served our country.
John, it’s great to see you again. We’re eager to hear your informed perspective on how REALTORS® can help veteran and active duty clients make the best use of this program.
Not only do you have the expertise of leading the VA Home Loan Guaranty Program, but you’re also a U.S. Navy veteran and have used VA home loans to purchase your own home, is that right?
Thank you for your service and your leadership. Let’s start with the big picture. What are the biggest advantages of VA home loans?
- No down payment – one of the greatest advantages.
- Exceptionally competitive interest rates, which are negotiable – VA doesn’t set the rates.
- No prepayment penalties, if veterans want to pay out their loan faster, that’s their option.
- No mortgage insurance premium – talk about saving a ton of money over the life of your loan!
- In the event of a temporary financial hardship, VA helps in securing alternatives to foreclosure.
- The cost savings up front and over the life of the loan puts our borrowers in a better financial position to build wealth for their families, make improvements on their homes, and save up for their next home purchase.
Veterans clearly see these advantages, as the VA home loan program has experienced record-breaking volume. In fiscal year 2020, the program served 1.25 million veterans. In fiscal year 2021, that number rose to 1.44 million veterans.
John, let’s talk about the buyers. One of the ways REALTORS® can help put veteran buyers in a strong position is by assuring sellers that the deal will close. Can you share some stats with us about veteran buyers?
- Veteran buyers are competitive borrowers across the income spectrum.
- Average credit score 722.
- Average Debt to Income Ratio 40.6%.
- Nearly a quarter of Veterans make a down payment even though it is not required.
- Average down payment is almost $54,000.
- Closing rate (% applications that have closed) over 80% on purchase loans.
- While 41.4% of VA purchase loans were first time homebuyers, VA home loans are a lifetime benefit. REALTORS® may have the opportunity to see the same buyer years later when they are ready to purchase a new home.
What types of properties can veterans purchase using a VA home loan?
- Detached single family home or townhome
- Residential income property (duplex, triplex, four plex – live in one unit and rent others)
- Condominiums (must be accepted by VA, or waiver process)
- Manufactured Homes
- Proposed or under construction, closing upon completion of home
- Details are in the VA Lenders Handbook on our website
With home prices rising, how much can veterans borrow on VA loans?
- Veterans with their full entitlement available no longer have a maximum guaranty amount.
- Jumbo purchase volume has increased 112% since this change.
- Veterans selling their current home to pay off their current VA-guaranteed loan can have a back-to-back closing and have full entitlement available.
- Veterans with some of their entitlement charged to a previous loan may still obtain a VA-guaranteed loan with their remaining entitlement. The conforming loan limit will establish the maximum loan amount that VA can guaranty in this situation. The lender will likely require a down payment on the portion of the loan that exceeds the amount VA can guaranty.
What’s the process to get a VA loan?
- Sign a contract to purchase a home contingent on approval of a VA-guaranteed loan.
- Select a lender, if not already prequalified, to process the loan.
- Lender obtains the Certificate of Eligibility for the Veteran online (most are issued online in seconds).
- Lender will review the income and credit information.
- Lender will order a VA appraisal, review the completed appraisal and issue a Notice of Value to the Veteran.
- Lender will make a decision on the loan.
- After the loan has closed, the lender requests the Loan Guaranty Certificate electronically from VA.
One impressive aspect of the VA home loan program is the low delinquency rate. In addition to robust underwriting, the VA works closely with veterans and servicers on alternatives to foreclosure. However, we know foreclosures do occur, and the VA acquires those properties. Does the VA list these acquired properties for sale?
- The default rate on VA-guaranteed loans is one of the lowest in the industry.
- VA helps Veterans transitioning into other housing to ensure a soft landing.
- VA has a property management contractor who maintains and markets the VA acquired properties.
- All offers to purchase a VA acquired property must be submitted through a licensed real estate broker.
- On VA's home loan website there is a link to the website with the addresses of VA acquired properties that are currently for sale as well as the information for real estate brokers.
- Show on screen: https://www.benefits.va.gov/homeloans/REALTORS®_property_mgmt.asp
Our members work with veteran buyers every day. Where can they get more information about VA-guaranteed loans?
- Please call us at 877-827-3702, 8am to 6pm Eastern.
- VA.gov: please scroll down to “Housing Assistance” in the middle of the page.
Thank you, John, for giving us an excellent deep dive into VA home loans.
I hope you all will stay tuned for part two, where John and I will be joined by REALTOR® and veteran Mark Worrilow to discuss challenges REALTORS® have experienced with the VA home loan program and ways to overcome them. Thank you for joining us!