If you’re selling your home, it’s time to get familiar with the VA home loan — yes, even if you aren’t military yourself. Here’s why. Veterans or active duty military homebuyers are likely to use the VA loan when purchasing a home.
What you’ll learn in this article:
- What is the VA loan?
- Preparing Your Home to Sell
- Research Housing Rates for Your Area
- Market to Military
- Meeting VA Requirements
- The VA Home Inspection
What is the VA loan?
For those of you unfamiliar with it, the VA helps those who are eligible purchase a home at a competitive interest rate, often without requiring a down payment or private mortgage insurance. That means that they not only offer zero down payment loans, but also have lower credit requirements than alternative financing options.
As you can imagine (or have used yourself), the VA loan is a popular choice. So if you’re near a military installation, the likelihood of your potential buyers using this lending option skyrockets. Don’t be mistaken, while there are duty stations tucked away on their own, there are plenty positioned in the heart of major cities that you might not even realize. The point? Thorough research can help you to consider all aspects of the buyers in your area. As a home seller in a heavily dominated market, consider getting to know the lending terms of the VA loan and how to market to VA home loan buyers.
Preparing Your Home to Sell to a VA Home Loan Buyer
There are a couple of key things to know about selling your home to a VA home loan buyer.
“One is that there isn’t a safer bet to close on the market. VA loans have had a higher average closing success rate than conventional loans over the last five years. The other piece is that sellers are not required to pay any costs on behalf of a VA buyer. There’s a misconception that sellers have to pay a VA buyer’s closing costs or are on the hook for repairs if the VA appraisal turns up issues. This isn’t a zero-sum situation, and both are matters of negotiation between buyer and seller.” — Chris Birk, Director of Education for Veterans United Home Loans and the author of The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.
Research the Local Housing Rates for Your Area
Here’s an interesting fact: you can look up how much military servicemembers and their families are allotted each month for housing. It’s called the Basic Housing Allowance (BAH). While it isn’t a perfect representation of each family’s personal budget, it does provide a decent baseline to understand where your property falls into the mix.
- Use the Department of Defense’s Basic Housing Allowance calculator to learn how much service members in your area are paid each month.
- Enter your zip code and a pay grade. Unless you live close to the Pentagon, you’ll be better served by estimating housing rates on low to mid-level pay grades, such as an O3 or E5.
Estimate the mortgage payment for your property.
Using a mortgage calculator, such as MortgageCalculator.org or Bankrate’s mortgage calculator, you can input your asking price, property tax, and estimated homeowner’s insurance. Consider adding two to three percent to your asking price to account for the VA funding fee for first- or second-time VA homebuyers.
Do the math.
Given the BAH for the local area and the cost of your home, will military homebuyers in your area be able to afford the monthly mortgage payment for a zero down payment VA loan? If your home sale price fits the military homebuyer’s budget, then great! It’s time to market to the military community. If not, homebuyers have the option to purchase your home with an alternative loan product—like state down payment assistance programs and FHA loans. However, for those who qualify, the terms of the VA loan are hard to beat.
If you’re in a tough selling market, consider working with your real estate agent to target homebuyers who may be eligible for these products.
Market to Military
When you market to military homebuyers, you’re working with a unique clientele who, unlike any other homebuyer, operate on a time crunch.
Since military families receive PCS orders for an average of three years, they don’t have the luxury to take weeks or months to find a home to buy. Instead, many families find a home within just a few days.
Knowing this about the military home buying market will help you understand why it’s critical to have great photos, a detailed description of your property’s layout, and a video home tour. Each of these marketing tools will help ensure that you make it onto your military homebuyer’s shortlist of potential homes.
The Logistics: Meeting the Requirements of the VA
The process takes longer when you sell to someone who is using a VA Home Loan than that of most other mortgages.
One way to expedite this process is to make sure that there aren’t any repair issues with your home that may cause either delays for repair or an outright rejection of your home. While the home buyer is required to pay for the inspection and appraisal, it’s not a bad idea to conduct your own pre-inspection with the intent to get your house ready to sell quickly.
For a few hundred dollars, you can mitigate this situation by hiring an inspector who is familiar with VA requirements. Consider it money well spent, as the VA loan follows a set of Minimum Property Requirements (MPRs) set to ensure that the property is safe, sanitary, and habitable.
VA Home Appraisal
“The appraisal process looks a bit different. Beyond the typical home valuation, the VA also considers broad property condition requirements. These Minimum Property Requirements are rooted ensuring Veterans are purchasing homes that are safe, sound, and sanitary. This assessment isn’t as in-depth as a home inspection, and any issues raised by the appraiser can be addressed in order to keep the deal moving forward.” — Chris Birk
Common things evaluated by the home appraiser:
- Heating and electricity. If the home has a wood-burning stove, is there a backup system?
- Water. Does the home have a water heater and access to drinking water and a working septic?
- The roof. Does the roof have a substantial amount of life left? Are there any leaks?
- Access. Can you reach the property by foot or car by way a private or public road year-round?
- Defects and deterioration. Is the home free of defects to include poor construction, or wood-eating insects like termites?
- Paint. Is there any lead-based paint that’s chipping or peeling that needs repaired?
- The location. Is the home located on a gas or petroleum pipeline or near high-voltage electric lines?
Tips for finding a home inspector:
- Get recommendations. You can’t be expected to know the local professionals when you’re new to the area. Check with your real estate agent, loan officer, or experienced friends who can point you in toward a respected home inspector.
- Look within reputable organizations. Organizations like the American Society of Home Inspectors and the National Association of Home Inspectors require certifications for membership. Finding a local who belongs to one of these groups assures a high standard of service.
- Know your state laws. Licensing requirements vary from state to state. If you’re unsure of yours, ask your real estate agent and make sure your home inspector meets the criteria.
- Ask for a sample inspection report. Nothing is better to determine the quality of someone’s work than viewing a sample of their job. This can tell you a lot about an inspector’s level of experience. You’re looking to make sure the report is clear and that it includes images of any identified issues around the property. You’ll also want to see recommendations made for potential homebuyers.
- Consider your budget. Home inspections aren’t free. The cost can vary depending on the provider, the size of the home, and location. However, they most often fall within $300 to $500.
VA Home Inspection
Things the home inspector looks for:
- Structure. What’s the condition of the property’s construction (walls, floors, foundation, roof, and ceilings)?
- Exterior. How much life is left in the current siding, windows and trim? Looking at other features– how’s the exterior lighting and fences? Is there proper drainage based on grade and elevation?
- Plumbing. What are the pipes made of? Is everything up to current standards to include the toilets, showers, sinks, faucets?
- Systems. Are the chimney, fireplace, water heater, furnace, A/C unit, and septic system all in good working condition?
- Roof and attic. Is the framing sound? Is there proper insulation and ventilation?
- Electrical. Is the electrical wiring properly grounded? Are all the light fixtures and the main electrical breaker safe and working correctly?
- Appliances. What’s the condition of the appliances like the dishwasher, range, built-in microwave, garbage disposal, smoke detector, and any other relevant small appliances in the home?
At the end of the day, remember that VA home loan buyers want the same thing as everybody else: location, good schools, and more. The basics to preparing your home to sell for a VA home loan buyer are the same as most others; it’s simply a few particulars that keep you on your toes.
By Danielle Keech
Johnson’s Sierra Lifestyle Team is experienced in working with VA buyers and sellers. We are here to guide you through the process.