Va Loan Requirements for Sellers

Va loan requirements for sellers

Va loan requirements for sellers. A VA loan is administrated by the Department of Veteran Affairs, which can be acquired if you are a veteran or active service member. Remember there are certain criteria for you to be qualify for a VA loan as a military person. 

VA loan also has loads of benefits for the veteran and active service member. Some of them are; no down payment, no private mortgage insurance required, low interest rate, streamlined refinancing option (interest rate reduction refinance loan or IRRRL). 

There are still bad rep of VA loan among real estate agents and home sellers. These myths are still lingering on VA loan and often misunderstood and it made some sellers reject VA loan. The most common myth that VA loan still get is so difficult for VA loan to be closed entirely. However, this myth is simply quite untrue. You will be surprised at how much the successful rate of a closing VA loan. They thought that sellers are required the closing cost of a VA loan entirely. The problem is that VA loan does limit what closing cost veterans can pay, but it actually depends on between the buyers and the sellers on who is going to pay the closing cost. Seller is not obligated to pay the closing cost entirely.  

Now, as a seller, in a VA loan you are required to pay closing cost. This is sometimes called “seller’s concessions”. Firstly, the seller must pay for the commission for real estate agents. Because sometimes, when you sell a home, you might want to do so with the help of real estate agents. They have the knowledge of the value property, excellent negotiating skills, and generally helping the process of selling or buying a house easier. They have to be paid for their expertise. Now, they do not charge the seller directly, instead, they take a cut from the sales price, which is called commission. Commission is often negotiable between the seller and the agent, usually the commission fee is around 4.98% to 5.01%. Usually, to make things easier, the seller adds the commission fee into the cost of the home. For example, the buyer paying $200.000 for the property, 5% of the $200.000 would be $10.000. Now, the seller did not receive $200.000, but instead have to pay the 5% commission and that would be $10.000 for the agent and the seller receive $190.000 for the sale of the property. Now this $10.000 does not go straight to the agent, instead they have to get through the selling brokers, because a real estate agent must work under an umbrella of a selling broker. Usually, it is a split 50/50 between the agent and the broker. Which means $5.000 goes straight between both the broker and the real estate agent. Va loan requirements for sellers.

VA loan actually has some pros from the perspective of a seller. Contrary to popular belief, VA loan does not only benefit the borrower or the veterans, but it could benefit the seller. There are several things that a VA loan could benefit the sellers.

So, what are the pros of selling to VA loan buyers? 

Firstly, they will have a bigger purchasing power. Different from conventional loan, where buyer need between 3% to 20% down payment. This requirement alone will be an obstacle to many potential buyers, even if their credit score and income is qualified as a buyer. While VA loan does not require a down payment, this will make their increase in purchasing power, as they have the money from the down payment fee allocated into the buying power. Va loan requirements for sellers.

Secondly, VA buyers have more reliable closing statistics. Contrary to popular belief, VA buyers actually have higher rate of successful closed loan than the conventional ones. 

Third, less strict underwriting criteria. Means VA buyers have typically looser underwriting criteria rather than the conventional loan buyers.

From these three pros, we can see that a VA loan could benefit the sellers instead of the common misconceptions towards it.  Especially, from a seller perspective, you could get a bigger profit and benefit if you are working with a VA loaner. Not only that, it could save you in time by dealing with a VA loaner rather than most conventional loaners in the perspective of a seller. 

However, when there are pros, there must be the cons. Even if all the benefits given by the VA loan is so many both for the veteran and seller, it comes with some cons. But then again, these cons are more of a challenge rather than obstacle, if you get more understanding towards these cons, it will be easier to deal with VA loan.

First con is minimum property requirement or MPR. The VA loan program exists to promote homeownership for veteran and active service member. However, VA loan does have some criteria regarding the property or a house that will be bought by the buyer. Based on VA guidelines, a house of a VA buyers must be safe, sound and sanitary. If the house you are trying to buy does not meet these criteria, then the VA will not approve the loan. Now, for the sellers that does not know these criteria will mostly be surprised when closing the VA loan process.

Second con is the VA appraisal, VA loaner must have VA loan appraisal before they could do a loan. A VA appraisal will be going to review the minimum property requirement of the house. The appraiser will then give the final review for the VA, if it does not meet the requirement, then the VA will reject the proposal of the loan. Then, either the buyer or the seller must resolve this issue.

Lastly, many people argue that a VA loan will take longer process to close. Contrary to popular belief, both VA and conventional loan takes about 40 to 50 days from the day the contract signed. So, seller should not take time as the con of dealing with VA loaners.

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