Important Aspects of the VA Loan
There are tons of agents out there who won't deal with VA Loans because they think the VA Loan process is "a pain in the @$$." It certainly has its draw backs but it really is not all that different from a conventional loan.
This post is intended to be a quick reference to highlight some of the most important aspects of the VA Loan. I strongly urge anyone who is thinking about taking on VA clients OR anyone who is thinking about using a VA Loan to do their research.
Let's dive in.
The first thing you need to know about VA Loans is that the VA Borrower is prohibited from paying a ton of different things:
Prohibited expenses of the VA Borrow are: Termite inspections, Real Estate Broker fees, Mortgage Broker fees, prepayment penalties, FHA/HUD inspection fees to builders, attorney fees as a benefit to the lender, and Real Estate professional's commission.
There is an extensive list of charges/fees as seen in the picture below:
And this is just the tip of the iceberg. When you make an offer there are certain things that MUST be in the contract of sale to protect the VA borrow's Ernest Money Deposit. The clause is supposed to be included in the Contract:
"It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs."
The VA mortgage is required to have a VA Appraisal done. The VA Appraisal assesses the fair market value of the property as well as the VA's MPR's. Usually it's the lender/loan officer who books the VA Appraisal. It's wise to have them book is ASAP after your offer is accepted because the VA Appraisal can take up to 14 days sometimes longer to be performed and returned which can drastically prolong your progress to closing.
It's important to familiarize yourself with the VA Appraisal Minimum Property Requirements (MPR's) as they have very strict criteria and can be viewed here: VA MPR's. I won't go into detail about these because they are pretty self explanatory and would add a lot to this post.
If the property is in need of repairs as per the appraiser the VA may issue waivers for some depending on the severity of the repairs required.
It's easy to confuse the VA Appraisal for a home inspection because of the strict requirements that they have however IT IS NOT. My recommendation is to familiarize yourself with the MPR's BEFORE looking at properties so you can find properties that have the best odds of approval for your client.
Some other really important aspects of the VA Loan is that seller concessions cannot exceed 4% of the property value.
My last bit of advice is, and this may seem obvious but could be overlooked in the fast paced nature of a VA Loan, if the VA borrower is absent and their spouse is present make sure you get a power of attorney signed so the can represent the buyer in his absence.