Expert Advice for VA Home Buyers

A salute to the troops

Backed by the U.S. Department of Veterans Affairs, VA loans offer some of the most desirable mortgage terms on the market.

While you need to meet the requirements, VA mortgages come with lower interest rates compared to other loan types and don’t need mortgage insurance. Though the largest benefit is being able to buy a house with zero money down, according to Embrace Home Loans’ Nick Rozek.

Rozek shared the ins and outs of VA purchase loans, as well as what borrowers can do to boost their chances of placing a winning bid.

Meet the expert

Nick Rozek is a loan officer with Embrace Home Loans. He originates residential mortgages in Maryland, Washington, D.C. and Virginia. Nick actively assists veterans and members of the nation’s military with their home financing needs. He also works with FHA, conventional, renovation and State Bond loans.

Rozek shared his thoughts with The Mortgage Reports on VA-backed loans and how they can help first-time home buyers lock in a low mortgage rate. Answers have been edited for brevity and clarity.

What qualifications do you need for a VA purchase loan and what benefits come with this mortgage type?

You have to be an active or retired member of the armed forces or a spouse of one. VA purchase loans also require a minimum 580 FICO score. And that’s pretty much it. In my opinion, VA loans are the best mortgages on the market.

They’re really strong, they have the lowest interest rates out of all the various loan options, and you can finance up to 100% — meaning you do not need a down payment. So they’re really great ways to help give some back to our veterans who give so much for the rest of us.

What are you seeing in the market right now with VA demand?

VA-financed government loans in general are second tier to your standard conventional loans. Right now, it’s a seller’s market and they have a bit of a stigma. Many think with a VA loan, you’re not putting a lot down or the appraisal could go wrong. They would rather see a regular conventional loan.

Because of this, we will underwrite the preapprovals with a fully approved loan commitment that lets them waive some of those contingencies upfront and make a VA loan offer a little bit more competitive. It can be a little frustrating, but these are some things we do to find that sweet spot.

How do you sway sellers into wanting these loans or not seeing them in a negative light?

We find out what the seller’s specific reservations or worries are. Largely, it’s the appraisal and how fast those loans can get done. VA loans traditionally have a turn time of about 30 days, but we’re able to move a little bit quicker; 21 days or less on all VA loans.

It’s also letting sellers know just how important it is that we have programs out there for vets and that they’re well qualified. They’re taking advantage of a program that’s going to get them better terms, this isn’t something they have to do because they can’t do anything else. It’s just the best program for them, but the deal will go smoothly and work out well. And usually that’s enough to move the meter for a home seller who’s a bit anxious about a VA loan.

What can VA borrowers do to help themselves?

A huge way to make their offer stronger from the contract standpoint is to waive your appraisal. So if a buyer is comfortable waiving that and the property underappraises, the buyer is comfortable making up the difference. And we can underwrite those pre approvals so that it’s secure and they don’t have to worry about the loan falling through at the 11th hour or anything like that.

But waiving the appraisal is the main reservation with realtors when it comes to accepting VA loans, as they don’t want to have to fix a window or the concrete steps out front. Waiving that appraisal upfront really helps them relax and say, ‘okay, we’ll play ball with this.’

What’s the most common thing that borrowers don’t know about VA loans?

Surprisingly, that the down payment is 0%. They also tend not to realize that the interest rates are much lower on VA loans compared to other products on the market. Another really cool thing about VA loans is they let you do what’s called an interest rate reduction refinance.

Those refinances have below-market rates as well. And what’s cool about it is they’re a very light loan, so all we need are pay stubs as long as you pay your current loan on time for six months. It’s a really smooth way to put some money back into a homeowner’s pocket if they used the VA purchase loan.

What advice would you give VA borrowers, both evergreen and in the current marketplace?

The advice I have for buyers right now is patience gets rewarded. It’s a seller’s market, there’s eight-to-10 bids on pretty much every home, and you’re not going to win everyone. But the more you get really comfortable with that process and that nature of the beast now, that right home will arrive.

And just making sure that they understand what those contingencies mean and why waiving them is okay, is a huge wake up. Knowing exactly how it works and then knowing what you’re risking — and not risking — when you waive them, I think really makes a difference for buyers right now, especially VA buyers.

Would you buy a house with a VA loan right now?

Yes, absolutely I would. The reason being, high interest rates is a short-term problem. They will ebb and flow. But home values are only going in one direction right now. Especially on the East Coast. You may have to buy at a higher rate right now but that same home is going to be worth 10% more in the next year. I want to capture that value.

I know I can buy my rate down. But if I wait to buy a year later, I’m gonna have to pay probably 8% more for that same home than I’d currently pay. I would rather accumulate that wealth ahead of time than wait for a slightly lower rate. And as those interest rates come down, you’re gonna see a lot more buyers hit the market when demand is gonna drive up the price. It’s like macroeconomics 101.

There’s lower demand in the market right now. So even though the prices are still high — and they are problematically high — that’s a different problem. If they’re gonna get higher as more buyers hit the market as the rates come down, then there’s an opportunity in the marketplace for some good deals on homes where you’re going to gain historically fast appreciation.

The bottom line

While affordability is strained for many house hunters, VA borrowers get the benefits of below-market interest rates, the option of putting no money down, and not having to pay mortgage insurance.

If you’re a qualified borrower who’s ready to buy a home, reach out to a local VA lender and get started.