Should Sellers Beware of VA Home Loans? Addressing Common VA Home Loan Myths

One of the ways the U.S. Department of Veterans Affairs (VA) supports veterans, current service members, and eligible surviving spouses is by helping them become homeowners through the VA home loan program.

Although VA home loans are a valuable benefit for those who have served our country and their families, misconceptions about the complexity of the process, additional closing costs, and borrower qualifications make some home sellers think twice about accepting offers that include a VA loan.

Keep reading to get the facts about VA home loans and how they impact—and often benefit—sellers.

What Is a VA Home Loan?

A VA home loan is a mortgage issued by a private lender but guaranteed by the U.S. Department of Veterans Affairs. This means the VA will reimburse the lender up to a specified amount if the borrower defaults on the mortgage.

From the buyer’s perspective, VA loans are advantageous because they:

• Don’t require a down payment
• Don’t require private mortgage insurance (PMI)
• Come with lower interest rates
• Limit how much they must pay in closing costs
• Make it easy to refinance to improve their interest rate or terms

However, some sellers don’t view VA loans in the same positive light.

The Reality of VA Home Loans for Sellers

In the current real estate market, home sellers can often afford to be picky about the offers they accept. 

Unfortunately, this seller’s market coupled with misconceptions about VA loans can make it difficult for military families to take advantage of this benefit when sellers turn down their offer in favor of a conventional loan.

Let’s look at the truth behind some of these misconceptions. 

How do VA buyers’ offers compare to conventional ones?

An offer from a VA buyer may look like other offers you receive from buyers with conventional loans. Because they don’t have to factor in down payment and other upfront costs, VA buyers may actually have more latitude to put in a more attractive offer and get to closing faster than other potential buyers.

What does the VA appraisal process entail? 

One aspect of a VA loan that can make sellers wary is the minimum property requirements and the VA appraisal process. 

Although these steps add a small amount of friction, meeting these requirements is fairly easy if your home is in good shape. 

Even if the VA appraisal reveals an issue that needs to be addressed, it doesn’t necessarily mean the seller will need to pay to fix it. The buyer may request an exemption from the VA or pay to fix the issue themselves.

There is a chance that the VA appraisal may delay closing slightly; however, the entire process, from the time the appraisal is ordered to the report being delivered, is typically 7-10 days.  

Do sellers have to pay extra fees?

Because VA loans minimize out-of-pocket expenses for homebuyers, sellers may have to cover more fees than they would with conventional loans. However, they are not responsible for paying all the closing costs, as one popular myth claims.

According to the VA, sellers must cover the:

• Real estate agent's commission 
• Brokerage fee
• Buyer broker fee
• Termite inspection

Other fees are negotiable, but the buyer may be willing to pay these fees to make their offer more attractive.

How dependable are VA buyers?

VA homebuyers do not all fit a cookie-cutter stereotype; factors such as their age, income, and whether they’re a first-time or seasoned home buyer can vary.

Despite the lenient requirements for buyers, the average VA buyer has a FICO score above 700 and $40,000 in cash reserves, which makes these buyers very well qualified. And, because they are backed by the U.S. Department of Veterans Affairs, VA loans close at a higher rate than conventional mortgages.

Get the Facts from a VA Loan Expert

Selling your home to a buyer with a VA loan isn’t as complicated as it seems. In many cases, it may be faster, easier, and more streamlined than working with a borrower with a conventional mortgage.  

Speaking with an FFB Mortgage Lenders VA loan specialist can ease your mind and help you understand the VA loan process, from application to offer to closing. 

To get answers to frequently asked questions about VA loans, download our guide, VA Home Loans 101.