By ROSEMARIE LABADIE – Broker, CA DRE #01240715 – Crestline Real Estate
Buyers today are taking advantage of many government guaranteed loans available, including FHA loans, USDA loans and veterans’ loans. Each has its own criteria. Today I’m focusing on VA loans. With these types of loans, the government is not actually financing the loans. It guarantees the lender will be paid if the borrower cannot make the payments and the home is foreclosed. This makes lenders more apt to accept FHA, USDA and VA loans.
A VA loan means the Veterans Administration is guaranteeing the loan. Not all veterans are eligible for a VA loan. The VA only offers its loan guarantee to veterans who served in some kind of conflict. If you are considering applying for a VA loan, I suggest visiting the website benefits.va.gov/homeloans. Once there you will be able to see which years qualify for a VA loan, and you can request a Certificate of Eligibility. You must have this certificate in order to qualify for a VA loan.
There are many reasons why eligible veterans prefer a VA loan. One is relaxed qualifying standards. Another major reason is the VA does not require a down payment and there is no PMI. (This is an additional insurance added to loans until the borrower has 20 per cent equity in the home. It can be very expensive and is added to the monthly payment.) Plus the VA interest rate is very competitive.
The VA does have one unique cost called a VA funding fee. It is 1.5 per cent of the loan and is collected at close of escrow. So, a $400,000 loan will have an additional $6000 closing cost. The fee helps the VA offer its loans very competitively.
For sellers, there are a few things to be aware of if you receive an offer that says the buyer is getting a VA No-No Loan. It means the buyer is putting in no money and will pay no closing cost. This means the seller is paying all the closing costs for both buyer and seller. The buyer’s closing costs include all the loan fees, insurance, taxes, escrow, title, etc. If you are considering accepting a VA No-No Loan, I suggest finding out exactly how much the buyer’s closing costs are. Another thing: the VA appraiser will inspect the property and ensure the house is in good repair and that there is no peeling paint.
One more unique criterion of a VA loan is the VA requires as Wood Destroying Pest Clearance, both section 1 (active infestation) and section 2 (conditions that could lead to an infestation). It does not matter who pays for the clearance, buyer or seller, but there must be a clearance in the file.
I had a VA buyer who was in a multiple offer situation, and the seller selected her offer because it gave the seller an opportunity to thank a veteran.
If you have a real estate question, I’d love to chat with you. Give me a call: 909-338-9995.