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At a Glance
Despite their incredible growth and success in recent years, VA loans still get a bad rap among some real estate agents and home sellers.
Lingering myths and misconceptions about these loans and their performance in the market push some sellers to reject VA offers entirely.
That isn't just a disservice to the Veterans and military families who've earned this benefit through service to our country. Plenty of sellers and real estate agents are turning their backs on the best-qualified buyers on the market.
Are VA loans bad for sellers?
Not necessarily. Accepting an offer from a buyer using a conventional mortgage when selling your home can be just as difficult as a buyer using a VA loan. There are many myths and misconceptions about the VA loan, but you as a seller should have nothing to worry about.
VA Loan Requirements For Sellers
Sellers should be aware of the following if selling to VA loan borrowers:
- The property must pass the VA appraisal and meet Minimum Property Requirements
- There are non-allowable fees a buyer may ask a seller to pay for
- VA guidelines allow sellers to pay up to 4% of selling price in concessions
- VA loans have a Funding Fee that buyers typically pay but could fall on the seller with negotiation
Let's take a closer look at some of the pros and cons of VA loans for sellers and why you should consider offers from VA buyers.
Pros and Cons of VA Loans for Sellers
| Pros for Seller | Cons for Seller |
|---|---|
| Higher closing rate | VA appraisals |
| Quick turnaround | VA minimum property requirements |
| Less stringent underwriting | May not get to meet the buyer (if that’s important to you) |
Verify your VA loan eligibility (September 15, 2024)
Pros of Selling to a VA Loan Buyer
Higher Closing Success Rate
VA buyers are more likely to get to closing day, at least on average, than any other buyer on the market.
Part of accepting offers is feeling good that the buyer has what it takes to close on the loan. Preapproved VA buyers are as strong a buyer as you can find in the current lending climate.
There are other considerations worth thinking about, from purchase price and closing costs to how long it'll take to close. But at the end of the day, home sellers want offers from buyers who can get to closing day without hiccups.
VA Loan Turn Times
There's a long-held misconception among some real estate agents that VA loans are littered with red tape and bureaucracy and take forever to close. The VA loan program has invested heavily in technology over the last decade, which has helped ensure VA loans keep pace with other loan products.
To be sure, every buyer's situation is different. But on average, there isn't a huge delay in time-to-close between VA and conventional loans.
Over the last two years, the average conventional purchase loan closed just three days faster than the average VA purchase loan, according to Ellie Mae.
Looser Underwriting Criteria
A big perk for buyers and sellers with VA loans is the relaxed underwriting process. Most Veterans will go through an Automated Underwriting System (AUS), which is fairly quick. Generally speaking, VA loans also come with looser credit score requirements and higher debt-to-income ratios, meaning you’re less likely to run into issues with your borrower’s income or credit history.
Because the underwriting process is less stringent than conventional loans, sellers can have peace of mind that underwriting should not hold up the process.
» MORE: See if you meet VA credit guidelines
Cons of Selling to a VA Loan Buyer
VA Appraisals
The VA appraisal process is two-pronged and involves both the valuation and a broad assessment of certain property conditions, known as the Minimum Property Requirements, or MPRs. During normal times, VA appraisals typically come back in just under 10 days nationwide, although the wait may be longer in more remote parts of the country.
There are also a lot of myths and misunderstandings surrounding VA appraisals. For sellers, your home doesn't have to be in perfect condition to pass the appraisal. If the appraiser does flag property condition issues, buyers may be able to obtain an exemption from the VA. If an exemption isn't granted, then the seller isn't required to pay for the repair -- it's possible for the buyer to do so in order to keep the deal moving forward.
VA Closing Costs
Some home sellers won't accept VA offers because they mistakenly believe they'll have to pay all of the buyer's closing costs.
The VA does limit what closing costs Veterans can pay, which is a huge benefit for those who've served our country. But sellers are not required to pay any closing costs on behalf of a VA buyer, including non-allowable fees Veterans aren’t legally permitted to pay.
Who pays what in closing costs is always a matter of negotiation between buyers and sellers. There is no requirement that a seller pay a dime toward a VA buyer's bottom line.
May Not Meet the Buyer
It’s not uncommon for Veteran homebuyers to be deployed while in the middle of their home buying journey. In this case, Veterans may invoke a power of attorney (POA) to handle the closing of their home.
Verify your VA loan eligibility (September 15, 2024)
Can a seller refuse a VA loan?
A seller has the right to refuse a VA loan, but it is important to know that discriminating against Veterans is against the law. Some sellers may be cautious of accepting VA offers due to misconceptions or past experiences with this type of loan. VA loans can sometimes take longer to close, largely due to the appraisal process and property requirements put in place. Generally, sellers are inclined to favor transactions that promise both speed and maximum profitability.
Should I sell to a VA loan buyer?
Home sellers hold all the cards when it comes to deciding from whom they’ll accept purchase offers. They’re under no obligation to open the door for prospective VA borrowers. But it certainly makes sense on a few fronts.
First, why not cast as wide a net as possible? It's not like sellers are required to accept any offer they receive.
Second, VA borrowers have proudly served our country. The least we can do is give them the opportunity to make a strong offer to purchase your home.
And, finally, VA buyers are flat-out great candidates to make a strong offer and get to closing day. Please don’t let institutional myths and misconceptions keep you from giving Veterans, active service members and military families a fair shot at the dream of homeownership.
ByChris Birk, Vice President of Mortgage Insight
Chris Birk is the author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.”An award-winning former journalist, Chris writes about mortgages and homebuying for a host of sites and publications. His analysis and articles have appeared at The New York Times, the Wall Street Journal, USA Today, ABC News, CBS News, Military.com and more.More than 300,000 people follow VA Loans Insider, his interactive VA loan community on Facebook.
About Our Editorial Process
Veterans United is recognized as the leading VA lender in the nation, unmatched in our specialization and expertise in VA loans. Our strict adherence to accuracy and the highest editorial standards guarantees our information is based on thoroughly vetted, unbiased research. Committed to excellence, we offer guidance to our nation's Veterans, ensuring their homebuying experience is informed, seamless and secured with integrity.
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