The real estate market is sizzling right now. Home prices were up 19% in April from April 2020, according to the National Association of Realtors (NAR). And in March, homes typically stayed on the market for just 18 days, which the NAR called “a record low.”
With that kind of market, VA borrowers might wonder what their odds are of making a competitive offer. Sellers are sometimes hesitant to accept VA offers, which can make it more challenging for VA homebuyers to compete.
But here’s the secret: A VA mortgage is great for both buyers and sellers. We’ll explain how to let sellers in on the benefits and give you some tips on how to get a VA offer accepted.
What's in this Article?
Why do sellers not like VA loans?
VA loans are fantastic mortgages — in fact, they’re the best deal in homebuying. Eligible borrowers can get home loans with 0% down payment*, no loan limits, and no monthly mortgage insurance.
However, sellers are sometimes hesitant to accept offers with VA financing because the U.S. Department of Veterans Affairs, which insures the loan, has strict property requirements.
If a VA appraiser decides a property doesn’t meet those standards, a lender can’t move forward with the loan until the issues have been fixed.
“Home sellers are often reluctant to accept an offer with a VA home loan due to the minimum property requirements assessment imposed by the VA,” explains Chuck Vander Stelt, a Valparaiso, Ind.-based real estate agent. He says the VA’s strict property requirements make sellers nervous because if the home doesn’t pass the appraisal, repairs must be made before the loan will close.
Additionally, if the VA-approved appraiser decides the value of the home is less than the asking or offer price, the lender will not approve the full asking price. They will only lend as much as the home is worth. At that point, the seller has to drop the price or the borrower has to pay the difference in cash. And if a borrower is using a zero-down VA loan, the seller may assume they don’t have the extra money on hand.
The VA appraisal myth
“There is also a myth that VA appraisals produce lower home valuations,” Vander Stelt added. “So many home sellers view a VA loan as a risk, which jeopardizes how much they will get for their home.”
Jason Gelios, a Realtor in Macomb Township, Mich., agreed.
“I have seen appraisers licensed to do a VA appraisal mark flaking paint as something that had to be fixed before allowing the deal to move forward,” he said. “Oftentimes, the seller’s real estate agent shares with their client some of the things that a VA lender will look out for. This, in turn, really puts a seller off. In this hyperactive market, this is why a homebuyer is considered to have one strike against them if offering VA terms.”
In a market where the demand for houses far outpaces the supply, a seller might dismiss VA loans outright because they know they’re likely to receive multiple offers — including ones with conventional loans or cash. They want to make sure that the offer they accept is a solid one that’s going to close with minimal hassle. Unfortunately, that’s not the perception they have of VA loans.
But that doesn’t mean you can persuade them. Sellers want to know they’re making the best decision possible when they accept an offer. In the next section, we’ll talk about how to make your VA offer stand out and get accepted.
How can I get a seller to accept my offer with a VA loan?
With the right strategies, you can get a seller to accept your VA loan offer. But it’s going to take a team effort between you, your real estate agent, and your lender.
Improve your odds by using a real estate agent and lender with experience handling VA loans and veterans/military members.
Here are some tips to make your offer stand out:
1. Add a personalized letter
“Include a cover letter with the offer that lets the seller know who you are,” recommends Eric Nerhood, owner of Premier Property Buyers in Seal Beach, California. “Include with the letter proof of VA underwriting approval as well as proof of your service, assets, and down payment funds—if you can make a down payment—to strengthen your offer.”
Gelios suggested using the letter to indicate that you are a veteran or military servicemember who has served your country proudly and is eager to buy a home. “This can really appeal to some sellers looking to feel good about who is purchasing their home. You may be able to win over the seller with an emotional and patriotic appeal,” Gelios said.
It’s a good idea to stick to your service in the cover letter. Because of Fair Lending laws, it’s best to avoid any personal information in the letter, such as whether you have a family or your religious affiliation. But sharing your story of your military service and what the home means to you can be powerful.
2. Offer above the asking price if you can
Money talks, especially when it comes to reassuring sellers. Going above asking helps you compete with other buyers who may have cash or are buying with conventional loans.
“A buyer looking to present their offer with VA terms in the current seller’s market will need to up the ante by offering a higher price, provided the appraisal allows it,” Gelios said.
3. Put down more earnest money
Earnest money is a good faith deposit you make when a seller accepts your offer. Putting down several thousand dollars shows the seller you have skin in the game. At closing, your earnest money applies to closing costs and down payment, if any.
Any earnest money not used is refunded to you at closing. But if the sale doesn’t close, the seller could walk away with that money. The exception is if the house appraises for less than the sale price; then you can walk away and take your earnest money back.
Is earnest money required for buyers with a VA loan? No. But in today’s competitive market, it’s difficult to stand out without it.
4. Ask your loan officer to vouch for you
Your loan officer can contact the seller’s real estate agent directly after you’ve been preapproved for a VA loan. If it’s an underwritten preapproval, meaning the lender’s underwriting department has already vetted your finances, the loan officer can explain that you are a strong candidate and are qualified to buy the home, barring any issues with the appraisal. This personal touch demonstrates your lender’s confidence in you — which may give you an edge over other buyers.
5. Be flexible
“Consider waiving your home inspection contingency or buying the home as-is,” Vander Stelt said. Also, don’t ask the seller for credits to cover closing costs. The VA allows sellers to contribute up to 4% of the home price in closing costs. But not asking for those concessions may make them more amenable to your offer. And allow the seller to stay in the home rent-free after closing if it would help them, Gelios recommends.
6. Get creative
If you can afford it, you might include other perks in the offer that will catch the seller’s eye. “Offer to cover the cost of hiring movers for the seller, which has been a successful negotiating term that has made for winning offers for VA buyers,” Gelios suggested.
7. Have your agent contact the seller’s listing agent
Find out what’s really important to the seller. “Your agent can ask what terms the seller would find especially beneficial. These can include a long or short closing to offering the seller post-closing possession for a limited time,” Vander Stelt said.
Don’t let making multiple offers before a seller accepts one discourage you. That’s the reality for many buyers in this housing market, regardless of what type of loan program they’re using.
But the more you can strategize with your mortgage lender and real estate agent, and the more money you’re able to bring to the table, the easier it may become to get your VA offer accepted.
Should sellers accept VA loan offers?
As a seller, there are good reasons to accept VA loan offers.
For one thing, just because a borrower takes advantage of a 0% down payment loan doesn’t mean they don’t have money. In fact, because they don’t have to make a down payment, they may have more cash available to make up the difference between the appraisal and the sale price if the appraisal comes in low.
VA borrowers who have been preapproved, with Fairway’s Advantage Pre-approval,** for instance, are also well-qualified. An underwriter has already reviewed their finances, their income, and their employment to determine whether they can afford a loan. A conditional approval lets you know that this buyer is capable of purchasing your home and that the sale is likely to go through.
Finally, accepting a VA offer is an opportunity to give back to the military community. A VA borrower may have moved many times due to deployments and being stationed at different bases. If they’re ready to put down roots in a community by buying a home, that’s a major milestone in their lives. You can be part of that by accepting their offer rather than instantly prioritizing homebuyers making offers with conventional loans.
That’s not to say you should accept a less solid offer. But a preapproved VA borrower is a great candidate for buying your property, and you can make a real impact by considering their offer equally alongside other buyers using other types of loans.
How to get a VA offer accepted FAQs
You can increase your chances of getting a VA offer accepted if you get preapproved before you start looking at homes. Sellers and their real estate agents will know you’re a qualified buyer. Other VA loan strategies include offering above asking price, not asking the seller to cover your closing costs, and putting down earnest money. If you don’t need to move into the home right away, you might offer to let the seller stay in the home for 30 days or so after closing, which alleviates the pressure on them to find a new house fast.
Closing on a home loan can take up to 60 days, longer in some cases. But some lenders close loans much faster than that, so it’s worth asking yours about their typical closing time on a VA loan. Realtor Jason Gelios said getting approved for a VA loan takes about the same time as any other type of mortgage. “Sometimes the process is held up a little longer due to the seller having to make a slight repair to satisfy the lender’s requirements,” he said.
You may be denied for a VA loan if you do not meet the borrower criteria, including minimum credit score, income, and debt-to-income ratio (DTI) requirements. You must be a veteran, active-duty servicemember, National Guard member, or Reservist with sufficient service history, or an eligible surviving spouse to qualify for a VA loan.
How do I apply for a VA loan?
Starting your VA loan application takes just a few minutes.
Once you connect with a lender, they can look up your eligibility status and determine how much home you can afford. Then, you can start looking at properties and strategize how to make a great offer that a seller will accept.
*A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits. Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.
**Fairway Advantage pre-approval is based on a full review of the borrower’s creditworthiness and is contingent upon there being no material changes in the borrower’s financial condition or creditworthiness at the time of final loan approval. Final loan approval is subject to the following conditions: (1) borrower has identified a suitable property, and a valid appraisal supports the proposed loan amount; (2) a valid title insurance binder has been issued; and (3) borrower selects a mortgage program and locks in an interest rate that will support the pre-approved monthly payment amount. Loan must close before the expiration date provided in the pre-approval. Please note that submitting verifying documentation is not a requirement to receive an estimate of closing costs associated with a mortgage loan.
Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.