This is good information for anyone who worries that a VA or FHA loan has more restrictions on it than a conventional loan.
Understanding your local market, working with an agent you can trust and a mortgage professional with experience with FHA and VA loans will get you into your new home in 2010.
If VA home loans and FHA mortgages are great for buyers, why won't sellers accept them? Debbie Rumsey suggested as much when she commented on my post about VA condo complex approvals, here on Active Rain.
Here is how real estate agents can debunk seller-held myths and get an FHA or VA offer accepted:
The low down payment requirement means less skin in the game
We can't debunk this because it's factual. What we can do is show the seller that the borrower has an automated underwriting approval and furnish income and asset documentation to support that approval. What this does is assuage the fears a seller might have about a buyer (and that buyer's lender) performing within a prescribed time period.
The (misguided) perception that the seller must pay for some or all of the buyer's closing costs
The seller is not required to pay ANY costs for the buyer but is permitted to pay up to 6% for FHA loans and up to 4% for VA loans. There are certain "non-allowable" costs for which the buyer is forbidden to pay. Either the real estate agents or the lender can pay those costs. All you (or any other agent) needs to request is a "no junk fee" good-faith-estimate to be furnished to the buyer. It is further advised that the following language be inserted in to the CAR purchase and sale agreement:
Seller not responsible for any buyer closing costs, regardless of the selected loan program. All agency-related "non-allowable" costs to be borne by lender.
The (false) belief that VA and FHA appraisers are (a) less generous in their valuations and (b) more restrictive in the remarks about property condition than conventional appraisers.
This is a common misperception. In the 1990s, it was widely believed that FHA and VA appraisers would intentionally "low ball" appraisals and "condition" for repairs on the property in order to "cover themselves" with the agency. The agencies did require the appraisers to warrant the condition of the property, much like a property inspector, in the late 1990s. The agencies relieved the appraisers of the (unfair) responsibility in the early part of this decade. Still, agents have a bad taste in their mouths from that time period.
Read the whole strategy piece.
Great tips. We seem to be getting sellers to accept FHA & VA loans with greater ease these days.
Thank you Cindy, these loans are coming back into play, and it is good to know what is what regarding the naunces of these loans for negotiating a transaction for your client. Another one is the Rural development loan.
Unforrtunately, it is still my experience that VA appraisers are extra conservative in valuing homes. However, I do think that in this market, Sellers should look at every offer they receive. I have one right now where they appraiser said to the Seller at the house, "There should be no problem with this appraisal" and today told the underwriter the appraisal was coming in low. What???? He did say he would look at other comparables, so now I get to do his job as well as mine...
Thanks for the tips.
Great tips, I unfortunately do not see that appraisors are getting looser, on the contrary, not just FHA, but all aspects of Real Estate. Also many agents still put in the private remarks "no FHA"