Many sellers — and their real estate agents — don’t like VA loans because they believe these mortgages make it harder to close or more expensive for the seller.
But those issues are largely myths stemming from the past. VA loans have changed a lot in recent years and now, they’re generally no more difficult or expensive for sellers than any other loan.
The most common myths are that VA loans:
- Are less likely to close than other types of mortgages
- Take ages to reach closing
- Have appraisers who are slow and routinely undervalue homes
- Require sellers to cover all the buyer’s closing costs
None of those apply today.
VA loans only take a few more days to close than conventional loans on average. And the idea that sellers must pay closing costs for VA buyers is simply untrue. In short, there’s no reason a seller should reject a purchase offer simply because it is a VA loan. But, due to misinformation, some might anyway.
Many Veteran’s long to own a home and although they can qualify for a loan, in today’s market, it feels nearly impossible to achieve their American Dream of owning a home. Why? VA loans do not favor well with sellers in the home offer process.
MYTH #1: Can a seller discriminate against a VA loan?
In short, yes. There are plenty of laws that ban discrimination in housing on many grounds. But none of them covers mortgage types. So, a seller might choose an offer with another mortgage type, like a conventional loan, over a VA loan if they wish.
MYTH #2: VA loans are less likely to close than other types of mortgages.
Not really. There is only a few percentage points difference between the failure rates of all the different types of mortgage applications. And VA loans are usually somewhere in the middle. Though, VA loans close at nearly the same rate as conventional loans — and at a slightly better rate than FHA mortgages.
- About 79% of all home purchase loans close
- 77.7% of VA purchase loans close
- 79.4% of conventional loans close
- 76.6% of FHA loans close
So, there’s always a small risk of a mortgage being denied at the last minute. But that risk is not significantly higher for VA loans than for other types of home loans.
MYTH #3: Does it take a VA loan longer to close?
According to the data, yes, it does sometimes take slightly longer for VA loans to close. But the emphasis is on the “slightly.” The average times to close a home purchase loan were as follows:
- VA loan — 57 days
- Conventional loan — 49 days
- FHA loan — 55 days
So, it only takes about 6-8 days longer, on average, to close a VA loan than a conventional mortgage. And if you’re making a competitive offer on a home — especially if it’s the best offer on the table — those 6 days shouldn’t be a huge concern for most sellers.
MYTH #4: Are VA loans more difficult for sellers?
Not really. They used to be more difficult in the past, but the VA has eased up on many rules that made things tougher for sellers. Now, the idea that VA loans take a lot longer to close or are more expensive for the seller is only a myth.
MYTH #5: Do VA loans cost more for sellers?
Absolutely not. Sellers do not pay any of the buyer’s mortgage costs unless they CHOOSE to help cover closing costs. A few VA loan closing costs cannot be charged to the buyer. But nowadays lenders typically pick up that tab.
MYTH #6: VA loans require sellers to cover all the buyer’s closing costs.
Not by default. A seller will only pay the buyer’s closing costs if they agree to do so — and that usually only happens in a buyer’s market. In today’s strong seller’s market, it’s very unlikely a seller would end up paying the buyer’s closing costs. Borrowers with VA loans have no more power to make a seller pay their closing costs than any other homebuyer.
Myth #7: VA loan appraisals are strict, slow, and undervalue homes.
They certainly shouldn’t. It’s the job of all appraisers to determine the fair market value of a home — regardless of the mortgage involved. And we’ve seen no evidence that those appraising homes for VA loans deviate from that. The VA appraisal is a little more strict. Appraisers have a longer checklist of minimum property requirements (MPRs) for VA loans than for some other types of mortgages. Those requirements protect VA borrowers from buying a home that’s not safe, sanitary, or structurally sound. And they’re rarely an issue for those buying modern, mainstream homes in good repair. Some items appraisers are looking for are:
- Mechanical systems that are safe to operate
- No signs of leaks in basements and crawl spaces
- No sign of termites, dry rot, or fungus growth
- Adequate heating systems
- Adequate roofing
- No lead-based paint (must be remediated if it existed in the past)
Following the appraisal, the VA will review the full appraisal report. If any issues with minimum property requirements exist, borrowers can ask the seller to fix the issues. If the seller refuses, borrowers may need to walk away from the deal.
Let’s clear up one thing. VA appraisers should take the general condition of the home into account when reaching a valuation. But they shouldn’t block a loan solely because of minor conditions, such as poor decoration or an overdue service of the furnace. The VA’s guidelines say: The appraiser should not recommend repairs of cosmetic items, items involving minor deferred maintenance or normal wear and tear, or items that are inconsequential in relation to the overall condition of the property. While minor repairs should not be recommended, the appraiser should consider these items in the overall condition rating when estimating the market value of the property.
Appraisers have the same goal no matter what type of loan is involved: to establish a fair market value for the home. And it’s their professional duty to do exactly that. Anyone who routinely undervalues properties is wrong and shouldn’t expect enduring job security. Again, the type of mortgage involved is immaterial.
As for VA appraisals taking longer, there may be a grain of truth in that.
Veterans United says, “The appraiser compiles the comparable sale and property condition information into a report that’s uploaded to the VA’s secure web portal within 10 business days on average, although it can be more or less depending on where the home is located and other factors.”
But there is an extra step with VA loans. Because appraisers’ reports must be reviewed by either a specialist employed by the lender or the VA itself. But the “days to close” data in the previous section clearly shows appraisals aren’t holding things up much.
MYTH #8: VA home inspection is strict.
There is no “VA home inspection”. There is a home inspection that is the same for any home, any loan.
The bottom line
The VA loan provides an outstanding path to homeownership for veterans. However, not all properties will qualify for this loan & not all sellers welcome VA loans. The program exists to help veterans find a place to live, so VA loans come with occupancy requirements Because the veteran is required to move in and live in the home for at least 1 year, the VA requires any home purchased with a VA loan to meet certain requirements. The VA enforces these property requirements through its appraisal program. As with any loan closing, this appraisal will confirm that the home is accurately valued. But the VA-specific appraisal also inspects properties to make sure they meet minimum property requirements. Homes need to be safe for occupants, sanitary, and structurally sound.
It’s an unfortunate reality that some sellers are biased against VA loans. But there’s no reason for them to be. The best thing you can do to get your VA offer accepted is work with a real estate agent and a lender who have a deep knowledge of VA loans and can help push your offer through to closing. And keep trying. The housing market is tough for everyone right now, and it will likely take multiple tries to get your offer accepted — VA loan or not. So, keep your head up and stick with it to land your dream home!