It’s Veteran’s Day today, and I am thankful for the wonderful men and women who serve our country. Being a licensed Realtor since 1993, you may find it shocking that I just closed my first Veteran’s Affairs (VA) loan last month. Even more shocking is that the seller’s agent, a prominent realtor licensed for over two decades, had never participated in a VA loan negotiation either.
At the beginning of the transaction process, we were both a bit unclear as to how a VA loan differed from the conventional, or typical FHA loan that we do so often. We were amazed to learn that many of our preconceived ideas were false. In fact, this escrow was the smoothest escrow either of us had ever had with buyers who enjoyed a zero-money down, 30-day close of escrow with money back in their pockets after close!
One of my biggest misconceptions was that entering into a negotiation with a VA buyer would be more difficult than working with a conventional buyer. This is sometimes true, mainly because sometimes seller’s can incur increased costs and are counseled against participating in this type of transaction. This was not true in our case.
To avoid the above scenario, it’s important to find a lender who does not charge a 1% lenders origination fee to the buyer to do a VA loan. If a lender charges this 1% fee then there are normal third party associated costs, such as the title or escrow company’s settlement fee, that are filed. Under the VA loan rules, a buyer is precluded from paying these fees, so the seller must pick up the costs at the close of escrow.
Another misconception is that the VA requires the home inspection to be done by a VA-licensed inspector only. This is no longer true and the home only needs to meet the standards of any other loan program–it needs to be safe, sound and sanitary. For example, if the house needs repairs, if it’s not sanitary or has structural, roof or other issues, those items would be required to be fixed no matter what loan program is involved.
Currently, mortgage rates are sitting at around 4% for a Jumbo, 30-year fixed mortgage through the VA. This is as low as these rates have ever been! Also, the loan limits are determined by the VA depending on the county involved. In Los Angeles, the VA loan limit is $700,000. This means that any home you buy requiring a loan of over $700,000 will require you to have a down payment. The formula to determine the required down payment is the (Purchase Price – VA County Limit) x 0.25. For example, if you wanted to purchase a $750,000 home in LA County which has a loan limit of $700,000, you would be required to have a down payment of (750,000 – 700,000) x 0.25, which is equal to $12,500. In 2012, the loan limits will decrease, which means the required down payments will generally increase.
Overall, I am excited to add this new chapter to my real estate notebook and I am glad that there are programs such as the VA loan program to help Veterans and their families. If you are a Veteran and are interested in how a VA loan can benefit you, please contact us at www.heartrealtors.com or call 310-259-7419. You can also contact Jackie Runk with National Bank of Kansas City, who specializes in VA loans at [email protected].
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