VA Home Loan Video Part Two: Reducing Barriers for VA Borrowers
Featuring 2022 National Association of REALTORS® President Leslie Rouda Smith, Acting Executive Director of the Department of Veterans Affairs Loan Guaranty Service John E. Bell III, and Northern Virginia broker Mark Worrilow
Welcome back, everyone. I’m Leslie Rouda Smith, your 2022 NAR President.
In Part One of our series on VA home loans, Acting Executive Director of the VA Home Loan Guaranty Service John Bell III joined me for a deep dive into this important program. If you missed that video, be sure to watch it to better equip yourself and your clients to successfully use VA home loans.
Part Two of our series will focus on challenges REALTORS® who work with buyers and sellers have experienced with VA home loans and solutions that will allow REALTORS® and VA to better serve veteran homebuyers.
Joining me and John for this discussion is Mark Worrilow, Managing Broker for Fathom Realty’s Prince William-Fairfax office in Northern Virginia. Like John, Mark is a U.S. Navy veteran who has used a VA loan to purchase a home. Additionally, Mark holds NAR’s Military Relocation Professional certification.
Thank you, John and Mark, for your service.
Mark, thank you for being with us. Let’s start with you. Can you tell us more about the MRP certification, as well as your experience working with veteran buyers and using a VA home loan yourself?
- Thank you for this opportunity and thank you for your leadership, and John for your service and leadership as well.
- Great certification veteran heavy areas but set apart in less heavy.
- Helps me connect with vets on a real estate level.
- Helps non-vets connect as someone who “has an understanding.”
- Appreciated by vets once they know what it is.
- Provides me an opportunity to educate other REALTORS® from my military and real estate experience.
- VA Loan – great experience, 1979 and 2020 one of those setting the record.
- Easy and in both cases allowed me to purchase and still keep capital.
- No drawbacks, beat out 2 other buyers in very competitive area.
I’d like to follow up on that, Mark. From your perspective, how important is VA backing for buyers? What advantages does it have over FHA or conventional loans?
- It is critical – provides early ownership opportunity and continuing opportunity.
- Can help build wealth and long-term financial security.
- Important in higher cost areas where even a 3.5% down payment ($21K) or Conventional downpayment ($60K) may be prohibitive.
- Conv/FHA loans add PMI/MIP adding heavily to monthly payment.
- Funding fee low and financed or paid at closing & no separate monthly addition.
John, let’s turn to you. What are some of the concerns you hear from veterans competing with other buyers in today’s market?
- Listing agents advising sellers not to accept offers with VA loans.
- Misinformation about closing times (time to close is competitive with FHA and Conv loans).
- Sometimes questions arise about the VA Escape Clause from a financial aspect, yet it rarely applies, as 8 out of 10 VA loan applications started in the last 90 days closed, exceeding other loan types.
Mark, a similar question for you – what reasons have you found that VA-eligible buyers don’t want to use this resource? Do you get pushback from sellers’ agents on accepting offers from buyers using VA backing?
- Not aware they can use more than once.
- Not aware of entitlement amounts expanded in high housing cost locations.
- Idea that seller will show favoritism to other loans.
- Pushback – sometimes falls to education and agent/sellers willing to listen.
John, REALTORS® appreciated VA’s recent changes to increase the allowance for appraisal fees and turnaround times. What are some other changes you’ve made to streamline the process?
- Closing times competitive with Conventional loans
- COEs (76% in seconds, 90% of COEs were issued within 1 business day, 99.6% within 5 days.
- Appraisals are ordered online, timeframes are closely monitored, FY21 average is 11.8 days from request to completed appraisal uploaded
- We have started a new program, Appraisal Assisted Processing Program (AAPP) to help appraisers gather information in order to cut down the timeframe to deliver the appraisal.
Even with changes like these, we hear from REALTORS® and clients that getting a property appraisal that can be used with VA backing – and getting it done on time – is a real challenge. Mark, is that true in your area? Has the VA’s increased allowance for appraisal fees or turnaround times helped?
- Fees not a problem; appraisals and turnarounds good for 30 day close.
- Talked to numerous lenders and not a problem.
John, if a VA loan appraisal comes in below the sales price, what can a REALTOR® do?
- Over the last two years, 85% of VA appraisals met or exceeded the sales price.
- Advantage of VA Appraisals –Appraiser is required to notify requester before completing the appraisal if it appears value will be below the sales price and allow 2 days for any additional market data – REALTOR® can help by providing market data.
- Another advantage – ROV (Reconsideration of Value) process, Veteran may request a reconsideration and REALTOR® can help by providing market data.
Mark, does this match up with your experience? How do you help when an appraisal doesn’t seem to match the market’s perception of a property’s value?
- Yes, even better percentage in my experience.
- When Tidewater invoked, look for properties in other sources, check tax records for non-MLS transactions, even check neighbors on refis; may need seller’s help on this.
Let’s talk about another complaint we hear from REALTORS® and veteran borrowers. As the VA guarantee program requires an appraisal, repairs may be needed for the loan to be funded. The VA also doesn’t allow buyers to pay for most of these expenses. Is that true? What are the sticking points, and what can be easily overcome?
- Yes, but only on items that are safety and health and welfare.
- Similar to FHA and even low/no down payment conventional.
- Discuss with listing agent that if VA is concerned; others most likely will be.
- May have to correct and if not it possibly limits other buyers.
John, can you weigh in on this from VA’s perspective? Have changes been made to address this issue?
- Because we are guaranteeing loans using taxpayer dollars, VA loans are required by law to have an appraisal. Appraisals determine the value of the property and ensure the property is safe, sound and sanitary. It is important to note that an appraisal is not a home inspection. A home inspection assesses a home’s condition, for instance, how well the systems function and if there are any notable issues with the home’s critical systems. Although a home inspection is not required, VA recommends that Veterans get a home inspection.
- Repairs are only required on about 17% of purchase appraisals.
- Cosmetic repairs are not required.
- Veterans may negotiate and pay for repairs.
- Veterans may request a waiver of repairs with the concurrence of their mortgage lender. The property must still be habitable from a standpoint of safety, structural soundness, and sanitation.
Mark, as a REALTOR®, how have you addressed these issues? What can REALTORS® do to help both buyers and sellers feel more confident with transactions involving a VA loan?
- John points to great statistics on appraisal and repairs, and waiver.
- For me “needed repairs” could well hold up sale on another financing option.
- With a veteran seller, I discuss their purchase and sale using a VA loan and it creates more understanding; not to encourage choosing a veteran buyer but to allay any concerns.
- Educate both types of clients on the facts not the myths.
- Understand closing rate higher.
- Universally defaults low so prospect of going to closing is great.
John, what recommendations do you have for REALTORS® to help both buyers and sellers feel more confident when using the VA home loan program?
- Encouraging sellers to consider prospective buyers using the VA home loan is an easy exercise; Veterans have sacrificed for the opportunity to use the VA home loan benefit.
- The VA home loan guaranty requires no additional work on the seller’s part.
- VA borrowers are well-qualified borrowers across the income spectrum.
- Because the VA home loan benefit is a lifetime benefit, our Veterans can come to you when they purchase a starter home and later when they want to upgrade.
- The experience you provide can bring our Veterans back to VA and back to you.
Mark and John, thank you again for being with us to share your expertise and experiences with the VA home loan program. This conversation has provided useful and actionable information for our members, who serve as an invaluable resource for veteran homebuyers across the country.
We encourage REALTORS® to obtain the Military Relocation Professional certification to show current and former servicemembers that you are their best advocate to help them find the housing solutions that suit their needs.
Visit NAR-dot-realtor and search M-R-P for more information.
As REALTORS®, it’s a privilege to help our veterans and servicemembers secure safe, sustainable housing. We will continue to work with VA and policymakers to make the path to homeownership easier for those who have selflessly served our country.
Thanks again for joining us.