Why Realtors Don’t Like VA Loans? What’s the Main Problem? (2024)

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Why Realtors Don’t Like VA Loans? What’s the Main Problem? ›

The fictitious reason why realtors don't like 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.

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 ...

Many listing agents and sellers simply do not fully understand VA Loans. They've unfairly become stigmatized in the current market because (amongst other things) many believe that a $0 Money Down Payment loan somehow means that the Veteran either doesn't have a down payment or sufficient funds to close.

Conventional loans are typically faster to close than VA loans. “Conventional loans [may] also receive appraisal waivers, reducing your closing costs and increasing certainty of closure for a real estate purchase,” says Davis. “And there is no funding fee for a conventional loan”

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.

VA loans come with unique requirements and stipulations that can introduce complications and delays for sellers. From strict appraisal guidelines to the zero-down payment feature, these aspects can make sellers hesitant.

There may be disadvantages to a VA loan. For example, a VA loan could have a higher interest rate than a conventional loan, although interest rates on VA loans are negotiable. In addition, most borrowers are required to pay a VA loan funding fee (currently between one and three percent of the amount of the loan).

It is the homebuyer's responsibility to pay for VA loan closing costs, but it is possible to get sellers to cover a portion of these expenses through negotiation. The VA limits what borrowers can pay in closing costs, and there are actually some costs Veterans aren't allowed to pay.

For all purchases, according to Ellie Mae, 74.3 percent of VA loans closed, compared to 74.1 percent of all mortgages. Conventional (non-government did slightly better than VA, with a 75.2 percent closure rate. In short, VA mortgages will close at a high rate and are less likely than the average loan to fail to close.

Is the VA loan going away? ›

Starting in 2020, VA loan limits were eliminated for active-duty military and veterans who have full VA loan entitlement. However, loan limits still apply to mortgage applicants who have defaulted on a VA loan or have other active VA loans. Here's what you need to know. » MORE: VA loan or conventional loan?

Common Reasons VA Loans are Denied

Income outside the qualification range. High debt-to-income ratio. Inconsistent employment history. Other factors outside your control (e.g., a private mortgage lender choosing to reduce or end participation in the VA loan program)

Appraisers must note any damage caused by termites, wood-destroying insects, pest infestation, dry rot or any other defects that cause structural issues with the home. The appraiser must look for issues that could make the home less stable and/or put the occupants in harm's way.

Some reasons a seller might refuse an FHA loan include misconceptions about longer closing times, stricter property requirements, or the belief that FHA borrowers are riskier.

While FHA loans are accessible to more borrowers, VA loans could be the better option, as the terms are more generous. For instance, VA loans do not require a down payment or mortgage insurance and usually have more lenient credit requirements, making it easier to qualify if you've a poor credit history or little cash.

Note: We require that a seller can't pay more than 4% of the total home loan in seller's concessions. But this rule covers only some closing costs, including the VA funding fee. The rule doesn't cover loan discount points.

Who pays closing costs in Virginia, buyers or sellers? Both buyers and sellers pay some form of closing costs on a home sale in Virginia, as is the case in any state. Both parties will also be on the hook for legal fees if you decide to hire a real estate attorney.

The short answer is “no.” It's true VA loans were once harder to close — but that's ancient history. Today, you're likely to have roughly the same issues with a buyer who has this sort of mortgage as any other. And VA's flexible guidelines may be the only reason your buyer can purchase your home.