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VA Loans

VA loans down payments and appraisals, these are different things that we need to talk about. So specifically talking about VA loans here, which you want to Shana Acquisto, she’s a luxury real estate broker. She travels a lot. She’s wearing a shirt that matches my hat. Very excited to see that today. And so let’s talk specifically about VA loans and the down payments.

So, you know, in a competitive market that we’re having, VA seems to be something that’s not as desirable. When you see the VA financing come over with your offer, you think, oh, there’s so many challenges that come along with this and it kind of falls to the bottom of the list regardless of the price. And why is that? Well, there’s a lot of additional restrictions that come along with that. And in this competitive market, we want to avoid any contingencies as many contingencies as possible. Mm hmm.

So something we started to see that kind of put them back in the game was the ability to waive the appraisals. Now, if you look at the contract, it says that you cannot waive the appraisal if you are a government type loan, FHA or VA. However, some of these lenders are sending letters saying, hey, it’s OK, my buyer is VA, but he has the ability to waive the appraisal.

So kind of overriding that. So we’re starting to see more and more people accept VA. Hey, we all want the veterans to be able to to, you know, swim in the same pool here. They would I would love for them to be able to secure a home. Right. They deserve it. Mm hmm. So, you know, that’s a way that we’ve seen for them to come back in and be more competitive.

So something about VA that we know is they have a very low down payment, zero. Right. They can get into a home with zero down. Hmm. So how that translates when you get a contract is you may hear, well, you know, their secure lender gives you all this wonderful information about them. Not to worry. We’re past everything. They’re as good as any other conventional loan.

So don’t worry about their low down payment, no red flag know, so they can put more money down. OK, it doesn’t mean they I mean, going this route doesn’t mean they cannot, OK? They can. And then at closing, it gets handled by closing, OK. So for our seller, what you want to do, it’s OK to take a VA. No problem. What you want to do is make sure that you have them putting a substantial amount of earnest money down. OK. OK.

And what’s happening is and this is just VA but this can happen to you in a conventional or any other loan, cash, whatever it is. You want to make sure that you have a substantial earnest money, because what happens is everyone seems to be waiving these appraisals and doing anything, whatever it takes, to get their contracts secured. Yes, they do.

What’s happening is in the middle, when it doesn’t appraise or they don’t get the loan program that they want, it’s easy for them to say, well, you know what, I’ll just forgo this small amount that I put down in earnest money and move on. It’s just the cost of of doing this transaction. So if you accept a very low, earnest money, you know, it’s easy. It kind of goes back to our option fee.

You know, we it’s a low amount, but we negotiate in for option. But it’s enough if you want to make it enough that if somebody is just not quick to throw in the towel and move on, this is their contract. So protect your sellers. Make sure that you are having your your buyers put a substantial amount of earnest money down. Now we ask about what is that amount? Well, you be the judge of that. It used to be one percent was part of the industry standard and typical of what we would see personally.

I say break it up, especially if they’re going to be waiving an appraisal. I would want to make sure that they have the enough money. Right, to bridge that gap in the event that it doesn’t appraise, even though that they’ve waived it. So show more down.

Yeah, no, I’m totally good with that, so I’m going to go back and hit on a few items that you spoke about as shown in the beginning. So VA is a program that’s available for the veterans and they often like the program because the low down, low down payment. And to have that, you would have a VA eligibility certificate. They would know all about that if they’re applying for a VA loan and there’s all different types of government loans.

So you might hear different words like FHA, HUD, you know, for just program after program that you could qualify for. And then what happens there is each of those loans have parameters and have guidelines that are attached to them. And at the end, those programs all get bundled up together. Right. So they’ll be one loan written for maybe two hundred thousand in another loan written for three hundred and four hundred five. And they’re all bundled together. And then these get sold in a huge group as mortgage backed securities and they all get together. So what they have to have is they all get to be homogeneous, they have to be the same in nature.

So each one of these different loan programs, as you kind of go along, they’re all going to have to be similar. So there’s going to be guidelines that go along with them. So somebody else coming in and saying, well, can’t we just change this or can’t we just do that? The answer is no. There’s programs and there’s parameters associated with them and those are all written in advance.

So those are they’re the underwriter is the person that make sure that they go through and they meet all these guidelines so that when they’re put on the secondary market and sold and they’re all together, that each one of these is exactly the same. OK, so that’s why all these have parameters and have things associated with them, because they get bundled up into not one home or two homes, but hundreds of homes and a lot of payments.

And it makes it a little bit more secure because the person who’s purchasing them eventually has the risk of a greater amount. But they know that all these loans should perform the same over a period of time because they all have the same characteristics.

Ok, so just be careful, you guys. And again, we’re talking about Vuh, but this really should hold true for any other building and even cash,

You know, and make sure that it kind of does hurt. You don’t want these people canceling right away. No, exactly. Make sure it’s substantial often that people are just sorry. This doesn’t work. I hear it is. I’m just going to walk away. You can have my money. Hold on a second. We have a legal binding contract that’s not how it works.

So in commercial real estate, the numbers that they put up are intense, right? Like really intense. And so think 10 percent. Yeah, I know. Like 10 percent of numbers. Like, that’s a real thing. Like, hey, if you’re if you’re going to get involved and you’re involved and let’s see what’s going on and here’s your option. Here’s your earnest. But like you’re putting up substantial money to show that you can do this.

And I think that in an environment like we have right now, we’re at super competitive and things. You’re hot. You’re going to see those numbers continue to go up, up and up. So don’t be afraid to ask for a much higher number for for money, protect your client.

So, you know, when we have a great offer, sometimes we get fixated on the price and we don’t want to model that or call somebody to, you know, to retract their offer, to make them happy that you guys, we have to look out for sellers, because if somebody spent minimal here and there, are they really that serious? I think it does show. How serious are they about this home? How bad do they really want it? And if you want it, you have to pay for it.

Episode Links

 Shana Acquisto,  luxury real estate broker

Episode Recorded Live on YouTube 7.15.21

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