This is a particularly difficult topic because the marketplace is extremely competitive right now. Very often, buyers that are looking to use VA financing can be discouraged from making an offer with VA finance. It’s almost like, “Let’s trick a seller to go ahead and put a conventional offer in there and put 20 percent down and we’ll just win."
But it’s not necessary! There are a few things that you should be doing with every single offer in order to win. So, here are a few tips you can use to win with your VAR.
1. Write a letter to the seller
Include a picture of your family, outline your service, your years of service, and your branch of service. People, I’m telling you, this will be a huge help! When you write about your family and your military service, this will help your offer. So that’s number one. Don’t listen to anybody that tells you not to write a letter because they’re wrong.
Escalating your offer means you should start at list price and escalate from there. So, let’s just say the home price is $499,900. You would offer the full list price of $499,900, and the agreement would be for you to pay a thousand over the next highest offer up to an amount and then you pick whatever that amount is. Now, the beautiful thing about doing an escalation with a VA loan is that you’re protected with your VA loan. You really are. Your VA loan actually protects you with your escalation. And if you want to know more, we should talk in private!
3. Consider the worst-case scenario
If you have money to put down, one of the interesting things about your VA loan is that you can get up to 100 percent financing. So, let’s just say that you have your full entitlements and you’re looking to buy a house, and you have money to put down. This is how it’s going to help your offer. Go with a worst-case scenario and start there. If you put 5 percent down and you are still required to pay a funding fee to the VA, the funding fee is a way that they removed PMI, so it’s still a great deal.
It’s safe to say that when you put 5 percent down, you lower the cost of your VA loan. It also gives you a 5 percent buffer in the event of a low appraisal. Why am I saying this? I’m not trying to get any veteran to escalate or pay more for the house, then there’s an underappraisal and, “Ricky just suckered us into putting 5 percent down; therefore, I’m just going to take it anyway.”
No, no, that’s not how it works. The goal is to get your offer accepted. The goal is to let the seller to know that you have a built-in benefit with your VA loan, that even if the home were to be under-appraised by 5 percent, you would still be okay and be able to purchase this home. Again, this is your option, your choice. Because again, your VA loan is something the seller is going to sign, acknowledging you’re going to have a VA loan. It protects you.
4. Waiver of appraisals are a joke
Nobody can really waive an appraisal unless you get a conventional loan and you have an appraisal waiver. You won’t even know that you’re going to get an appraisal waiver unless you actually put it in as an application with an address. Even then, the backend does whatever it does to figure out whether or not you’re going to get an appraisal waiver. That’s for a conventional loan only.
It’s more than likely that you are going to need an appraisal on pretty much every single loan. The fact is that you will be going up against conventional offers that are saying they’re waiving the appraisal.
Well, guess what? They’re not.
They can’t. In fact, this is part of the education process that needs to happen with the listing side and with the buyer agent that would be representing you, the buyer, and for you to know that waiving the appraisal doesn’t exist. When my team and I do a phone call with the listing agents on our VA offers, we make sure that you understand this fact because we ask them:
"Hey, do you have any other offers?"
“Yeah, we’ve got other offers.”
“Are any of them conventional?”
“I assume these guys are all conventional and just waiving the appraisal or contingencies, right?”
And they open up. They’ll say, “Yeah, they’re waiving appraisal.” And then I get to respond, “Well, you know, there is really no such thing as an appraisal waiver, right? Let me explain why …”
If there’s a health and safety issue, or if there’s a value issue, that’s fine. They can waive the value issue with the appraisal, but so can you on a VA loan. That’s what I’m getting at. There’s nothing really different with this appraisal problem or appraisal waiver between a VA loan and a conventional loan, unless of course you actually get the conventional waiver of appraisal, which doesn’t exist on a VA!
It’s safe to say that inherent in a VA loan, it is much safer for a seller to accept the VA loan offer than it is for them to take a conventional offer. It’s just that I need, or somebody needs, to get to the listing agent so they can be told this and told the reasons why. But it’s also important that your offer does the right things: you write the letter, you escalate if necessary, and then, if you‘re financially able to, you put in a down payment.
By the way, you saying you’re going to put 5 percent down doesn’t require you to put 5 percent down. You can put down less. But prepping for that, there are some reasons 5 percent down actually makes more sense. For example, second time use of your VA benefits. Five percent down actually reduces the funding fee massively. We can talk through that personally, but again, make a strong offer.
In the market right now, there are no deals. The only deal right now is how good interest rates are. Even if this article is read five years down the road and rates are up to 4 percent, it’s still a great interest rate and VA loan rates are still going to be much lower than conventional rates.
So, there are all the ways to win an offer with your VA loan. Want to dive even deeper? Reach out to me personally and let’s connect!
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