Hello, LOs!
Apparently yesterday's LendingLife newsletter about VA purchase mortgage discrimination struck a chord with many of you. I received about 50 emails from LOs who feel strongly that more education and alterations to the program are needed if veterans are going to compete in a hot market.
So, without further ado, let's dive in.
"Veteran buyers experience resistance and disappointment partly because of seller (and agent) misinformation and the incorrect assumption that a purchase with a larger down payment is more likely to succeed," said a Navy veteran who's been an LO for 31 years. "It's not true."
The LO offered this advice to veteran buyers:
- Deal with a local mortgage person who's very experienced in VA loans. Realtors are leery of out-of-town lenders where they can't speak to the loan officer.
- When a veteran makes an offer, they should urge their Realtor to get the listing agent and the loan officer talking. Since the transaction succeeds or fails based on financing, having the loan officer as an advocate can make the difference.
- If possible, the veteran should get a "TBD approval." Their file is fully underwritten and approved even though the property is To Be Determined. It is the next best thing to a cash offer.
- Don't get discouraged. In today's hot market, conventional buyers may have to write offers on several properties before getting one accepted.
The LO believes the VA system is just fine. "It's the sellers and their agents that are the problem," he said. "VA loans have a few different steps compared to other loan types, but ultimately they are easier to approve than other loan types — regardless of the down payment."
Another LO said some of the VA program stereotypes come from arcane practices no longer in effect, such as the seller having to pay buyer closing costs.
Since so many Veteran buyers were not getting their offers accepted, the VA finally changed the requirement.
"While there are still some fees that the veteran is not allowed to pay for, those are usually absorbed by the lender," the California-based LO said. "However… I STILL to this day get phone calls from listing agents asking whether their seller is obligated to pay closing costs. So there is still a HUGE misconception out there. I try to educate my Realtors as often as possible about this, but I think this is one of the reasons veterans so often get passed up in the process. The agents or sellers who don't bother to call I'm sure end up passing up the veteran."
The "lack of education" point came up repeatedly.
"The biggest problem I see with veterans' ability to compete in this housing market is lack of education on the part of the Realtors," said a North Carolina-based sales manager. "They are convinced that an offer from a buyer with a VA loan is going to be a world of trouble so they will convince their seller not to consider the offer even if it's a better offer. I realize that a veteran can back out if the house doesn't appraise but isn't that true with any other loan too? They can also agree to pay more than the appraisal and pay the difference out of pocket, same as any other loan. I suspect there's some concern by sellers when they see 100% financing. That automatically says 'weak borrower' to a Realtor that isn't experienced with VA financing. There's also harm to VA borrowers by inexperienced mortgage lenders."
Like many, the North Carolina LO opined about VA appraisers.
"I know they are tasked to consider safety issues for the veteran but sometimes we see appraisers go to extremes," he said. "I once had an appraiser write up a repair condition for a small hole in the yard because he stepped in it. We had to get the hole filled in with a shovel of dirt and send the appraiser back out to issue a final inspection at a cost of $150. There's concerns with VA appraisers when it comes to homes built to an older building code where they may ask for railings or some addition that wouldn't be needed for any other loan. It would be very helpful if the VA removed these additional requirements, over and above what an appraiser would write up for a conforming loan, provided there's no harm to the veteran by doing so."
One Colorado LO said the VA should do away entirely with their "old appraisers who only do VA appraisals" and no others. "The VA needs to instruct all VA appraisers that low-balling the appraised value of a home is NOT SERVING veterans; it's hurting them and not just that one veteran buying that one house; but these appraisers are hurting every veteran."
A broker from Florida said what's happening is straight-up discrimination and she's sick of it.
For the most part, Realtors have "zero knowledge on financing," she said.
"They do not understand qualifying ratios, impacts on credit trends and so many other factors that have and continue to affect prospective home buyers. To an even lesser level of knowledge are the property sellers… One of the Realtor's duties is to guide the seller on making a sound decision in their best interest. How is a VA, FHA or conventional borrower a better buyer in comparison to one another? How would a Realtor be able to distinguish their financial abilities based on loan type? They can't. This is not about the best interest of a seller. This is basic discrimination."
Thanks to everyone who shared their feelings on the subject! We'll have an HW+ story that examines some of these issues next week.
James Kleimann
Managing Editor, HousingWire
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