Buying a home with a VA-backed loan | Veterans Affairs (2024)

FAQs

Why do sellers not want buyers with VA loans? ›

One of the primary reasons some sellers may hesitate to accept a VA loan is due to misconceptions about the program. Some sellers believe that VA loans involve more red tape, delays, or stricter inspection requirements compared to conventional loans. In reality, VA loans are not as cumbersome as they may seem.

A common hurdle for many self-employed VA loan borrowers stems from inconsistency in their income. Remember, the underwriter is here to verify you can repay the loan. If your tax returns show an insufficient amount or heavily fluctuating income, it can trigger additional scrutiny or a denial.

There is no maximum VA loan, except that the loan cannot exceed the lesser of the appraised value or purchase price, plus VA funding fee and energy efficient improvements, if applicable.

It is the underwriter's objective to identify and verify income available to meet: • the mortgage payment, • other shelter expenses, • debts and obligations, and • family living expenses.

Sellers Must Pay Certain Fees

The same isn't true when you use a VA loan. The loan program prohibits buyers from paying certain fees at closing. Typically, this will include the loan underwriting fee and the closing fee. Those fees don't go away.

Some sellers reject VA loans because of that inspection, assuming it'll complicate the sale. But, sellers don't necessarily need to pay for any required repairs themselves, Wemert points out. In many cases, VA buyers might be willing to cover the cost.

Red flags include the presence of radon gas, asbestos or lead-based paint within the home, or properties located in a flood zone, near a sinkhole, or proximity to any type of environmental contamination.

About 15% of VA loan applications get denied, so if your's isn't approved, you're not alone. If you're denied during the automated underwriting stage, you may be able to seek approval through manual underwriting.

The fictitious reason why realtors don't like VA loans

They often wrongly presume that deals with VA loan buyers are riskier, cost more, and are more challenging to close than other types of loans. Some of them even believe that the home sellers will have to pay for the buyer's closing costs.

Who pays closing costs on a VA loan? The buyer is typically responsible for paying for things like the VA funding fee, loan origination fee and more. However, the seller might be able to contribute; they can pay closing costs up to 4 percent of the total home loan price.

What will fail a VA home inspection? ›

Electrical and plumbing systems must be in good condition, roofs must be defect-free and basem*nts must be dry. VA appraisal guidelines can be strict and prevent some fixer-uppers from passing the appraisal.

The VA doesn't set a minimum credit score for VA loans at the program level. Instead, the VA relies on lenders to ensure borrowers are a satisfactory credit risk. VA lenders typically require a FICO score of at least 620. High loan amounts, such as those exceeding $1 million, may require a higher credit score.

Final Underwriting And Clear To Close: At Least 3 Days

Once the underwriter has determined that your loan is fit for approval, you'll be cleared to close.

Active Military Borrower's Income. For active-duty military borrowers, a Leave and Earnings Statement (LES) is required instead of a VOE. The LES must be an original, electronic, or a copy certified by the lender to be a true copy of the original.

The timeline for underwriting can vary depending on several factors, but it generally takes somewhere between three to six weeks to complete. The time it takes for underwriting can be influenced by the complexity of your financial situation, the volume of loans being processed by the lender and other relevant factors.

For the most part, the process for closing on a VA loan follows the same procedures as other loans with comparable closing times so long as the interested home buyer has prepared their CEO, has their financial ducks in a row, and the house holds up to scrutiny under the VA's MPRs during the appraisal process.

The process takes longer when you sell to someone who is using a VA Home Loan than that of most other mortgages. One way to expedite this process is to make sure that there aren't any repair issues with your home that may cause either delays for repair or an outright rejection of your home.

One reason a seller might refuse your FHA-backed offer is that they believe the home sale may be more likely to fall through due to the FHA loan program's more lenient underwriting requirements.

Sellers often prefer conventional buyers because of their own financial views. Because a conventional loan typically requires higher credit and more money down, sellers often deem these reasons as a lower risk to default and traits of a trustworthy buyer.