Are San Diego Realtors using VA loans properly in their real estate brokerage business? Most agents don’t fully understand them and their customers are suffering because of it.
Here are four myths, truths, and action items about VA home loans which could help Realtors serve veterans better:
LOAN MYTH 1: You have to be on active duty, in the military service, to use a VA home loan.
FACT: Eligibility is determined by current and past service. Essentially, if a veteran served for at least six months, from 1964 to today, they most likely have VA home loan eligibility. There are 15 million veterans under the age of 65 today; most of them should be eligible.
ACTION ITEM: Ask every new homebuyer, regardless of their age if they served. Don’t rule out the ladies; about 10% of those vets are women.
LOAN MYTH 2: Sellers have to pay for the veteran’s closing costs.
FACT: The VA did away with non-allowable closing costs about two years ago. As long as the non-recurring closing costs do not exceed 1% of the loan amount. the veteran buyer can pay them
ACTION ITEM: Write “seller not responsible for any VA loan-related costs" and call the listing agent to explain this when presenting an offer.
LOAN MYTH 3: VA loan limits aren’t high enough for the San Diego real estate market.
FACT: The 2018 San Diego County loan limit is $649,750 for ZERO-DOWN loans. Down payment requirements are 25% OF THE DIFFERENCE between the zero-down loan limit and the actual purchase price.
ACTION ITEM: Compare jumbo loan financing with a VA home loan for this Carmel Valley home. Assume a $1,400,000 purchase price.
75% conventional loan, at 4.75%, $350,000 down payment.
VA loan at 4.25%. Minimum down payment equals $1,400,000 MINUS the VA loan limit of $649,7500) TIMES .25%= $187,500 down payment.
LOAN MYTH 4: The VA charges an expensive funding fee.
FACT: That funding fee is less expensive than the PMI it replaces. The funding fee for a 100% loan is 2.15% (financed on the loan) for first-time users, 3.3% (financed on the loan) for repeat users. For all 5% down loans, the funding fee drops to 1.5%. For 10% down loans, the funding fee drops to 1.25%
ACTION ITEM: Compare a 10% down conventio lonalan, with PMI, to its VA alternative:
$300,000 90% conventional loan requires $156.25 in PMI monthly.
$300,000 90% VA loan has no monthly PMI but adds $3750 to the loan. That savings is recouped in 24 months. The VA loan then, is less costsly if your customer plans to live in the home for two years or more.
