In many areas of the country, real estate markets have experienced a shortage of inventory, especially in major metropolitan areas. The seller, in many cases, will have many competing offers to choose from, plus it can be difficult for a seasoned buyer to find a homeowner who accepts an offer using VA financing. Based on previous issues from seasoned buyers, several strategies will be demonstrated on how to make your VA offer competitive with other types of financing, such as a traditional offer or an FHA offer. You may wish to discuss your options with your insurance officer in order to increase your chances of having your offer accepted.
There are usually 5 main areas of concern:
1) Closing costs
2) Misunderstanding of mandatory fees
3) VA assessment vs. traditional assessment or FHA assessment
4) The offer with more money looks more attractive to the seller
5) VA offer requires termite removal
These five issues will be explained in more detail in this article. Understanding these five common areas of misunderstanding is likely to increase your chances of getting an acceptable offer.
Many veterans need help with their closing costs. In the seller’s market, instead of asking the seller to help pay closing costs, you would have to ask the lender to increase your interest rate, and ask for credit from the lender to cover closing costs. Regarding the additional fees, many agents misunderstand that the seller will be responsible for the mandatory fees.
This group of fees includes: warranty, processing and underwriting. VA guidelines state that this fee is the seller’s responsibility when a lender charges a single point insurance origination fee, (which is rare in the current lending environment).
This concern must be addressed, so that all parties have a thorough understanding of the VA guidelines. The VA assessment is usually seen as more rigorous than the traditional assessment or the FHA. The most significant misinterpretation is that the VA appraiser may order more repairs on the subject property. In today’s lending world, due to stricter federal guidelines, traditional insurance ratings, FHA or FHA all use similar criteria.
Many sellers think that a traditional offer of 20% down payment sounds like a stronger proposition than a VA insurance with no down payment. The offer with the highest down payment is believed to have a higher probability of closing. If both buyers are pre-approved by an experienced insurance officer, and the borrower’s information is pre-approved by Fannie Mae’s insurance program, called Desktop Underwriting, they both have the same probability of closing.
The only area in which a VA insurance may have a slight drawback is that VAs require termite reporting and clearance, but conventional and FHA insurances do not. VA guidelines allow you to pay for repairs, but not the report itself. You can view to pay for repairs if the report is available and you are aware of the costs. If the repairs are expensive and the seller chooses to refuse the repairs, the house may be what you need to move.