Benefits of VA Loans for Buyers, Sellers

WASHINGTON — With the real estate market experiencing what the National Association of Realtors® is calling "subdued" sales – largely due to high mortgage rates – there are several reasons for property sellers and buyers to look favorably upon VA loans.

"VA loans are backed by the government. This means that buyers are more likely to make it to closing, reducing risk to a seller," said Stephanie Pitotti Williams, a military spouse and real estate professional at Keller Williams Metro Center.

The VA's home loan guarantee program provides low interest rates, limits closing costs, does not require private mortgage insurance, and can be used multiple times.

And while it also doesn't require a down payment, "if a VA buyer chooses to make one, it can act as a built-in appraisal gap without penalty or change to the overall loan," Williams said. Conversely, "if you have a conventional buyer with an appraisal gap, they must make their required down payment, plus come up with the gap funds."

The program also allows higher seller contributions toward closing costs, which Williams said can attract buyers.

VA appraisals also offer what is called a Tidewater period, meaning if the appraiser cannot account for the seller's asking price, the seller is warned before an official report is made. This gives the seller an opportunity to provide additional information to justify the price tag. Conventional loans don't offer this advance notice.

To the benefit of the buyer, appraisals can sometimes flag safety and health hazards, and a VA amendatory clause must be signed prior to closing, which allows the buyer to void a contract if the appraised value doesn't meet the sales price.

VA loans can take longer to close than a conventional loan or cash offer, but it's worth considering the approach.

"In a slow market, they're the best thing since sliced bread," Williams said.

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