What Sellers Should Know About VA Loans

The Veterans Administration home loan program, also known as a VA loan, has helped millions of Americans become homeowners. But some sellers still don't have much information about how these loans work. When you're selling your home, being informed will help you make a good decision.

How the Process Works

A buyer starts the house hunting process by obtaining proof from the VA that they are eligible for this type of loan. The buyer then contacts a VA-approved lender, who handles the financing. These are private lenders, and most of the process is the same as it would be if the buyer were choosing any other type of mortgage.

The Veterans Administration does not lend buyers money; they only guarantee a portion of the loan. That means the lender still has recourse if the property is foreclosed on. Because of that guarantee, buyers can get more favorable terms. It's similar in concept to FHA loans but applies only to Veterans, currently enlisted military personnel, and sometimes their spouses. The bid process is the same, and once you accept the buyer's bid, everything proceeds as usual with an appraisal, home inspections, and closing. Most VA loans close in 30 to 45 days, just as other mortgages do.

Some sellers worry about delays and extra paperwork because the VA is a government agency. However, the VA's role in this process is small, and VA-approved lenders are very familiar with how it all works, so those fears are simply unfounded.

Where the Big Difference is For Seller

VA loans are subject to a stricter appraisal process. All mortgage lenders require an appraisal of the property before finalizing the loan. For VA loans this process also includes an assessment of Minimum Property Requirements (MPR). For this reason, not every appraiser handles these types of assignments. Although this could cause potential delays, in most areas, it won't. Unless a property is remote and difficult to get to, there are likely plenty of appraisers in your area capable of handling the job.

Some sellers worry unnecessarily about the minimum property requirements. Because they are guaranteed, VA loans are designed for properties that are in good shape and move-in ready. For most people, selling your home will mean it's in move-in condition already. In situations where that isn't possible, this can be an issue. Fixer-uppers and homes that need extensive major repairs will require some other form of financing. In most cases, a buyer using a VA loan will probably already be aware of this, so it shouldn't be a big issue for the seller if they have submitted a bid on your home.

Closing Costs

There are limits on how much and what type of closing costs can be paid as part of a VA loan. As a result, sellers often think they will be required to pay them instead. The closing costs and who pays what are a frequently negotiated portion of the contract when selling your home. And as with any other type of mortgage, the seller still has the option to negotiate or just say no. Buyers may have to pay some costs in cash at closing instead of rolling them into the loan, or sellers may opt to adjust the selling price upward to compensate.

When selling your home, it's a good idea to keep an open mind and objectively assess the offers you receive. That buyer with a VA loan could be the perfect match for you!

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