Five Sad Stories
Let me give you a few stories of how this is happening to some veterans I know:
Don't be fooled into taking out an FHA loan thinking it will be cheaper than a VA loan.
Cesar and Leslie came to my first VA seminar in 2002. They wanted to buy their first home, but were told they didn't qualify because of their income, credit, and insufficient down payment. After looking at their credit report and putting a loan application together, I found they were well qualified, especially for a VA mortgage. So I told them to start looking for a home. About four months later, I got a call from them that they had found a home, but they wanted to know if I did FHA loans. I don't do FHA loans, and I asked them why they wanted a more expensive and higher interest loan, when they were qualified for a VA loan. Their real estate agent didn't know how to do a VA offer, so she structured a FHA purchase that appeared to be just like a zero down VA loan. But the agent was just playing with the numbers. The seller wanted $216,000, and she was going to offer $225,000, so there would be $9,000 for the closing costs & down California Home Loans and Mortgages for Veterans payment that would come from the seller. This is fairly typical: the vet gets pushed into other types of loans, either conventional or FHA. This might sound like creative financing, but it's not a good loan. I was pretty upset, especially since Leslie was a disabled veteran. After realizing I was not getting anywhere with the real estate agent, I advised Cesar and Leslie to "fire" the agent, and let me find one who is familiar with VA offers. Fortunately, they took my advice. They ended up with the same home, with some big differences:
(1) The purchase price went from $225,000 back to the original $216,000
(2) The FHA loan would have been for 7.5% interest as opposed to the VA's 6.0%
(3) FHA loans require private mortgage insurance, which would have cost them an additional $130 each month! The FHA mortgage would have cost them over $400 more each month!
Don't believe anyone who says than an FHA loan is better than a VA loan.
Richard, a Sacramento veteran, called me about refinancing his FHA mortgage on his home he had owned less than a year. First thing I asked him was, why, as a veteran, he bought the home through FHA instead of VA. He said he was told the FHA mortgage was better than the VA. Instead of zero down and zero closing costs, Richard had to come up with about $16,000 for everything. He also had a higher interest rate and private mortgage insurance. The interest rate reduction programs that the VA offers are only for current VA mortgages, so I could not help him. Another veteran "stabbed in the back."
VA loans do not take longer to close and aren't more expensive than FHA or other loans.
William contacted me after serving in the Marine Corps in Iraq. He and his wife had put an offer on a home in Fresno. Wanting the seller to pay for closing costs, their offer was over the asking price. In the active market, there was one other offer that was coming in. Their real estate agent found out the sellers took the other offer, even though it was lower than the list price. We found out the sellers were told not to accept the higher VA offer, because VA loans took much longer to close and that they would make less money on the sale because of all the closing costs they'd have to pay. We reached the conclusion that the only logical source of this misinformation was the seller's real estate agent. So many real estate professionals have had a bad experience (or heard about one) with a VA purchase that their advice to the sellers is to stay away from them. Whose fault is that? I'll get to that a little later.
Another veteran couple, Rob and Kirsten, attended my VA seminar and then purchased a home in Connecticut, using his VA benefits. During the transaction, the real estate agents for Rob and Kirsten and the sellers, continually gave them misinformation that threatened to cancel their offer.
First offense: The agents told Rob, Kirsten and the sellers that the VA appraisal takes over six weeks-three times what a conventional appraisal would take!
Second offense: Everyone was told a VA loan takes twice as long for approval and underwriting: up to three months! All this would have meant that Rob and Kirsten would be out of their contract, and the sellers could back out of the offer.
As it turned out, the appraisal took less than two weeks, and we closed only two days after the contract date (only because the sellers delayed their signing!)
What can you do as a veteran to make sure that you get the lowest interest rate and closing costs through a VA loan?
Oneida is a veteran who was moving back to Oakland, and found a fixer-upper to purchase. She wanted to use her VA benefits, but neither real estate agent had any experience with VA loans, nor did they know of any local lenders with VA mortgage experience. So, she found a national lender who was back East. The problems started when the lender told that her interest rate would be higher because of her credit (Actually, her credit problems were minor and her credit score was well above the minimum VA requires.) The interest rate for her VA loan ended up being over 8%. In addition, the "zero-cost loan" ended up costing her about $6,000. The interest rate should have been closer to 6.5%. She eventually got one of my mailers about refinancing her VA mortgage, and called me. I had to tell her that there was nothing she could do to get any of her money back. The real estate agents and the lender didn't do anything unethical or illegal. The errors had to do with their lack of experience with VA purchases. The good news is that I was able to help her refinance to a VA mortgage at 5.25%. That's a 30-year fixed rate mortgage she could keep for a long time.
A Few VA Loan Myths
Here are some myths I've heard from veterans:
(1) Veterans can only use their mortgage benefit once. Of course this is not true. A veteran's mortgage benefit can be used over and over.
(2) VA mortgage benefits were good for only ten years. Some people confuse mortgage benefits confused with educational benefits. The veteran's mortgage benefit never expires.
(3) The maximum loan amount available to veterans is the one they received when they were discharged. Not true! Every time the loan amount increases, the higher amount is available to all veterans.
(4) Veterans always have to pay closing costs. False. As long as the lender and real estate agent know what they're doing, they can make sure not one penny comes out of the veteran's pocket.
(5) VA mortgage loans are available only to people who have been discharged from the military. VA loans are actually available to veterans AND active duty personnel.
(6) Because they are zero-down loans, interest rates and closing costs are higher. The opposite is true. The VA mortgage has the lowest interest rates and closing costs in America. That's why I call a VA loan "the Best Mortgage in America."
What Can Be Done?
Now that you've seen what some of the problems are, what solutions are out there to help you, the veteran, get 100% of your mortgage benefits? Sadly, the burden falls on the professionals we all trust: the lenders and real estate agents. There are some unique things about a VA mortgage, but none are mysteries or anything that would make the lending process difficult or more time consuming. But, like anything one is not familiar with, it becomes a problem if nobody's taken the time to study the VA mortgage. As a VA Mortgage Specialist, I represent less than 1% of the lenders in America. I've yet to meet a real estate agent who feels confident about doing a VA transaction. All it takes is an unpleasant experience with a VA purchase, and it becomes known throughout their office as the loan to avoid. This attitude spreads to their professional colleagues, and includes buyers and sellers.
Here's a typical scenario:
A real estate agent writes an offer up for a veteran buyer, and presents it to the real estate agent representing the seller. It's a full price offer, so the seller accepts it. This is where many problems begin. The buyer's agent refers the veteran to their favorite lender. None of the three professionals have ever done a VA transaction, or attempted to learn how it is done. Eventually, the loan officer gives the loan package to the underwriter. The underwriter sees a purchase contract not written properly for a VA mortgage, and the loan officer has not put all the proper documents in the loan package. Meanwhile, the veteran has faith in these professionals. With many documents missing or completed incorrectly, the underwriter puts two to three times more effort just fixing all the problems. As a result, the loan ends up taking two to three times longer to close.
By the time the veteran finally purchases the home, all the professionals have told them that the delays and problems were all caused by the Veterans Administration and its loan program. In the end, everyone walks away believing that VA mortgages are the "loans from hell." All the professionals vow to steer their veterans into other loans the lenders are more familiar with, and worse, tell all their sellers not to accept VA offers. I'm here to tell you there is nothing in the VA loan process that adds any more time than the process for a conventional loan. The problem will only be solved when those professionals spend a little time educating themselves on VA mortgages, which can be done simply by contacting the VA. I wish the VA had some kind of rating system to let veterans know whether they're dealing with professionals that are experienced in VA loans, which would ensure a smooth transaction, and that veterans will get 100% of their benefits.
The Veterans Administration even has rules against recommending any individual or company to help you. So, without any good referral for competent VA lenders or real estate professionals, you're on your own.
The VA Loan Guys Seminar
The VA Loan Guys Seminar deals with all the issues I've exposed. I even show veterans how to qualify their lenders & real estate professionals.
For information on how to set up a free seminar for your veteran post or group, please call or email me.
Or, if you have a story you'd like to share with others, let me know. The time has come to put a stop to this national tragedy. If you are a veteran, on active duty, or have friends or family that are, you owe it to them to pass this information on to them.
You, the veteran, fought for America's freedom, have earned this benefit, and deserve 100% of it.
To get started, or if you have any questions,
contact William Roberts at The VA Loan Guys!
