The real estate industry comes with its share of pitfalls, but loans backed by the Department of Veterans Affairs are not among them.
However, many buyers and sellers are still wary of taking advantage of VA loans. Whether it's due to old myths or modern misunderstandings, it's possible that both buyers and sellers are missing out on potential opportunities. Fortunately, Macomb Daily has put together a few reasons why no one should fear loans backed by VA.
For buyers, the most immediate benefit of a VA loan is a severely reduced down payment (if one is required at all). Veterans do not have to put a down payment on the price of a house up to a certain limit. These limits change by region, but tend to cover the bulk of the cost if not the whole price. If buyers need to borrow above the limit, they are obligated to put down $1 for every $4 borrowed. So, while some veterans may still need to make a down payment, it will be far lower than most other loans.
Sellers who are wary of accepting VA backed loans are skipping over a significant portion of potential home buyers.
"Most home-sellers have major misconceptions about veterans and active military, so they don't even try to market their homes to this large population," says Wanda Petty, president of the Washington, D.C., chapter of the Veterans Association of Real Estate Professionals (VAREP), according to Macomb Daily. "As a result, they are missing out on a huge consumer market."
1. Average close time. Many people believe that VA-backed loans close more slowly than other types of loans, but this isn't the case. According to VAREP, VA loans actually close two days faster on average. It's not a wide margin, but it might help in a bind.
2. Smooth qualifying process. VA backing means everything is put on the table: there are few surprises when it comes to these loans. If you've done your homework, everything should go smoothly. You shouldn't expect misdirects or foul-ups.
3. Wide appeal. VA loan limits are fairly high, and veterans are absolutely allowed to purchase homes that surpass them. While some homes might be financially out of reach for VA backing, they are few and far between.
4. Lower credit requirements. If you're hesitant to engage in a big financial commitment because of a spotty credit history, fear not. VA backed loans usually require a credit rating of 525 compared to the average 600 needed for most other loans.
5. Increase in buyers using them. With the drawdown of operations in the Middle East, veterans are flooding consumer markets, including real estate. Between 2007 and 2013, VA loan use increased by 370 percent. That much growth means that both sellers and buyers are becoming more aware of how VA loans work, as well as how to use navigate them during the transaction.
Loans backed by VA might make a few buyers and sellers leery, but don't let bad information fool you. They make purchasing a home a much more realistic option for many veterans, and they're only increasing in popularity.