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How Can Buyers with VA Loans Compete?

A VA loan is attractive if you’re active or retired military, but sellers sometimes think conventional loans present fewer problems. A larger deposit might help.

NEW YORK – Military families often have a disadvantage in today’s market. Active or retired military with Veterans Affairs (VA) loans often lose out as sellers show a preference for buyers with conventional financing or all-cash offers. They believe the latter offer a faster and smoother closing.

In an April 2021 survey from the National Association of Realtors® (NAR), 94% of Realtors said sellers are most likely to accept an offer with conventional financing over a government-backed loan. VA loans are partly guaranteed by the U.S. Department of Veterans Affairs and offer zero percent down financing.

But sellers may have some outdated concerns over VA loans, according to Caitlin Turkovich, branch manager specializing in VA loans at Union Home Mortgage in Las Vegas.

“VA loans are actually the easiest to qualify for if you have entitlements,” Turkovich told CNBC. Entitlements refer to the amount the VA will repay if the borrower defaults.

Turkovich says buyers should start by using a lender who specializes in VA loans to help clear up possible misunderstandings and outline specifics in buyer preapproval letters.

Turkovich says VA loan buyers can also take other steps to try to stand out, like by making a 5% down payment. That matches the minimum for some conventional mortgages, and it also comes with a monetary perk, dropping the VA loan funding fee from 2.3% to 1.65%.

VA loan buyers can make their offer stronger by offering earnest money – such as 5% versus 1%, adds Cedric Stewart, a real estate professional with Keller Williams in Rockville, Md. “The largest earnest money deposit is another instrument to communicate an ease in the relationship.”

Source: “How to Stay Competitive Using a VA Loan in a Sizzling Housing Market,” CNBC (Nov. 11, 2021)

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