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Hi,
I am selling a house and one buyer wants to use VA loan with 5% down payment.
The other buyer is with conventional loan with 20% down payment.
Which one should I use? Is VA loan approval rate 100%?
Thank you!
I don’t think there’s a material difference in approval rates, there are some things that can’t be passed to the buyer in a VA transaction, and their appraisals (from what I’ve experienced) do tend to be on the more conservative side.
I assume both are same price and come with pre-approvals in hand? Other terms of significance? Closing date, contingencies?
I would ask your realtor for experience with the realtors and the lenders - see if they have good or bad reputations for attention to detail and follow through. Your realtor can call the lenders and realtors involved and get a feel for the qualifications and other shareable details about the buyer.
If they're really tied, you can see if you want to ask for a highest and best from them, and see if one of them can go up. Unless you're worried about appraisal if they bid it up.
On appraisal, it's true VA appraisals can be strict if there's a lot of deferred maintenance on the property that might get flagged. If it's in good shape, I wouldn't worry too much about those differences.
Last edited by Diana Holbrook; 07-11-2018 at 10:02 PM..
All else being equal (i.e. the offers are the same), I'd go for the conventional loan with 20% down as I'd feel that the person offering 20% down has more hard cash assets in order to make up any appraisals that are lower than the asking price.
This person (likely) has better credit and payment history, more cash to put down, and can actually afford the loan. There are those who would argue to be "nice" and appreciate the veteran loan person for their service, but this is a business transaction.
We are getting ready to do our 13th real estate transaction in the last decade and I can say from experience that my buyers who have had the highest down payments and most conventional financing have been the transactions that weren't always lingering on the precipice of not closing or fell through altogether.
In my current market VA and other low or no down payment offers are not looked at favorably. Cash or conventional gets you the house.
It is wrong to assume a VA buyer has less money or is less qualified. Some of the biggest offers we've made have been VA loans, and very qualified high dollar buyers. Pilots, other professionals. Quite frankly, if a person qualifies for a VA loan, they would probably be foolish to get a conventional. It's often a better value for the borrower, with lower closing costs and a lower interest rate.
There are other clues besides loan type to indicate whether the buyer is just barely qualified or well set to complete the purchase. This is where the realtors talking about the relative qualifications of each one can make all the difference.
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