If you don’t already know what VA loans are, who can use them, and how they can help your business, read on – we’ve got a lesson for you.
VA loans are home loans available to veterans of all branches of the United States armed forces. They are guaranteed by the United States Department of Veterans Affairs (VA), where the acronym comes from.
People eligible for VA loans do not need to be on active duty – they simply need to be able to provide proof that they have served at some point.
They have helped around 21 million veterans afford housing since the end of World War II, when they first became available.
The Department of Veterans Affairs does not provide home loans directly, it works with participating lenders. Knowing about VA loans can help you better serve veterans.
“VA mortgages are for qualified veterans and on active duty,” said Sherrie Dean Stephenson, director of home loans for Fort Bragg Federal Credit Union.
“VA loans are more flexible than traditional mortgages because they allow higher debt ratios and are able to take into account the disposable income of the borrower. They are also more competitive with their interest rates and are generally slightly lower than traditional conventional mortgages, ”she said.
Perhaps more importantly for agents, knowing about VA loans can help you sell more homes.
It’s always a good idea to ask potential clients if they have ever served in the military. VA loans have many financial advantages that can make housing more affordable for veterans than conventional loans.
While some veterans are familiar with VA loans and their benefits, others are not. Help them understand the benefits! Here are six things you and your clients should know about VA loans.
1. No down payment required (usually)
One of the main ways that VA loans can help you sell more homes is that they are more financially beneficial than conventional loans.
Veterans and their families who may not be able to meet the standard 20% down payment, for example, can get a VA loan through a participating lender without a down payment because 90% of VA loans do not require a deposit.
2. Interest rates are often lower
VA loans often carry lower interest rates than conventional loans. It can really help here to calculate the numbers by showing the veterans how much they can save over the life of the loan.
Even saving $ 25 or $ 50 per month can save them $ 9,000 to $ 18,000 on a 30-year mortgage.
Figures like this clearly show how much veterans and their families benefit from a VA loan.
3. Credit standards are more flexible
It is important that potential buyers know their credit rating. Often times, it is difficult to get a mortgage from a conventional lender if their credit score is less than excellent or very good.
Some lenders charge a higher mortgage interest rate for credit scores outside of this range.
VA loans, however, are often made to people with a credit score starting at around 620. This is below the very good and excellent range and is often rated as average or even bad.
It can be very helpful for veterans to realize that the dream of home ownership is not beyond their reach if they only have an average credit score.
4. No mortgage insurance required
VA loans also do not require private mortgage insurance (PMI) payments, which can be up to 1% of the purchase price of the loan payments.
Like a lower interest rate, this can drastically reduce the payments over the life of the loan. If a veteran buys a house worth $ 200,000, for example, the PMI can cost $ 2,000 with a conventional mortgage. A VA loan puts that money back into the veteran’s pocket.
These are four very positive benefits of VA loans. There are also some potential drawbacks; However, you can probably increase your sales if you honestly advise veterans about it and recommend solutions.
5. Reviews may take longer
Appraisals and other documents can take longer with VA loans than with conventional loans.
“VA appraisals are more demanding, for example the house must be ready to move in,” Stephenson said. “If the appraisal and inspection show that work needs to be addressed, those issues need to be addressed before the loan closes. “
VA loans also have very specific requirements when it comes to things like septic tanks, private wells, acceptable condition of houses, etc.
Some areas have a good history of completion time, roughly comparable to conventional loan appraisals.
But in other areas, VA loan appraisal timelines are lagging – be prepared. It may be a good idea to bid higher for the house so that sellers are more inclined to reserve it for your buyers.
6. Salespeople have misconceptions
The costs associated with closing a house are limited to 1% of the cost of the house with a VA loan.
In areas where the fees are higher than this, sellers may be reluctant to sell to a buyer with a VA loan, as sellers may think they have to recoup any cost above 1%, which they don’t. would not have to do with a conventional loan holder.
“The VA financing costs can usually be added to the loan,” Stephenson said, “and if you are a disabled veteran, you are exempt from that cost.”
VA loans are a great financial deal for current and former members of the armed forces.
And they can also, potentially, help you sell more homes if you familiarize yourself with the benefits and learn how to honestly advise your clients about their financial situation.
Kayla Matthews covers smart technology and future trends for websites like VentureBeat, Curbed, and Motherboard. You can read more of Kayla’s articles on her personal tech blog: Productivity Bytes.