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No question-- conventional. Its not even a contest.
VA loans are fraught with paperwork, stricter (and often absurd) appraisals that are well below market, and buyers who don't have the cash to make up the difference.
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.
Or you have people like me who certainly could not have afforded a down payment at the time, which made the no money down VA loan a blessing. In my social group, I am one of many who used the VA loan for this purpose.
Note, my answer related to the OP specifically, where the conventional loan came with more money down than the VA loan. If both potential buyers offered the same amount of money down, then it really wouldn't matter to me.
Or you have people like me who certainly could not have afforded a down payment at the time, which made the no money down VA loan a blessing. In my social group, I am one of many who used the VA loan for this purpose.
Note, my answer related to the OP specifically, where the conventional loan came with more money down than the VA loan. If both potential buyers offered the same amount of money down, then it really wouldn't matter to me.
The important difference to consider being your personal circumstance and credit, not so much the loan type.
I agree that someone with no cash reserves who may barely meet the qualifications for the loan is a higher risk than one with high cash reserves.... But that judgment cannot and should not be made from the loan type alone, or how much they decide to put down.
Example from my own experience. VA buyers, two professional pilots with high income, buying a home on acreage with a nice home on it, but no horse facilities, for around $300K. They had over $150K in cash available but chose to put zero down. Their reason was they wanted to preserve their cash to pay for a barn, indoor arena and fencing to be built and paid for in cash. They had BIG plans for the place and there was ZERO doubt about their ability to cover the loan. In fact, they qualified for loans more than twice that amount, and we had looked at many, hoping to find a place with the facilities they wanted already in place. In the end, they decided to build it themselves. I was able to share that background with the listing realtor and paint a more accurate picture of their finances.
I can also think of many circumstances where someone may have cash available from the sale of a home, but high DTI ratio or uncertain employment, whose qualification for their conventional loan was much more shaky.
My only point is... the loan type itself is not enough information. If I wanted to really help my seller decide between the two, I'd be talking to the agents involved to get any important background they can give. There is much they can share that would paint a better picture for the seller to use in deciding than simply loan type.
Last edited by Diana Holbrook; 07-12-2018 at 10:24 AM..
The important difference to consider being your personal circumstance and credit, not so much the loan type.
I agree that someone with no cash reserves who may barely meet the qualifications for the loan is a higher risk than one with high cash reserves.... But that judgment cannot and should not be made from the loan type alone, or how much they decide to put down.
Example from my own experience. VA buyers, two professional pilots with high income, buying a home on acreage with a nice home on it, but no horse facilities, for around $300K. They had over $150K in cash available but chose to put zero down. Their reason was they wanted to preserve their cash to pay for a barn, indoor arena and fencing to be built and paid for in cash. They had BIG plans for the place and there was ZERO doubt about their ability to cover the loan. In fact, they qualified for loans more than twice that amount, and we had looked at many, hoping to find a place with the facilities they wanted already in place. In the end, they decided to build it themselves. I was able to share that background with the listing realtor and paint a more accurate picture of their finances.
I can also think of many circumstances where someone may have cash available from the sale of a home, but high DTI ratio or uncertain employment, whose qualification for their conventional loan was much more shaky.
My only point is... the loan type itself is not enough information. If I wanted to really help my seller decide between the two, I'd be talking to the agents involved to get any important background they can give. There is much they can share that would paint a better picture for the seller to use in deciding than simply loan type.
There are FAR more infantry with no down payment struggling to make ends meet as VA buyers than pilots. The military is a pyramid with the vast numbers of service men and women making very little far outstripping the elite officers and professionals at the top.
You are right on one point, we don't have any information on the two buyers other than their loan types so, I stand by my assertion that a 20% down payment and conventional financing appears much more attractive to most sellers than a VA loan with 5% down. I started another thread about a similar subject on zero down loans. There are other issues with VA loans concerning paperwork and appraisals that I and others have mentioned.
On the little information we have, the conventional loan wins.
I would say if they are both preapproved then it should not matter what the downpayment is.
But the OP is trying to choose. All things being equal, a loan with a buyer who has a lot of cash to put down shows more promise of closing if a house does not appraise. So that puts the conventional loan right over the top.
No question-- conventional. Its not even a contest.
VA loans are fraught with paperwork, stricter (and often absurd) appraisals that are well below market, and buyers who don't have the cash to make up the difference.
You are wrong.
There are ZERO additional pages for sellers on a VA loan, compared to FHA.
VA and FHA have a page that indemnifies the buyer from loss of Earnest Money in case the appraisal comes in low - but this one page is really overkill, because low appraisals trigger re-negotiation on every deal unless specified in the contract.
Your note about the appraisals is fraught with hyperbole. Yes, VA appraisals can call for some quasi-cosmetic issues to be addressed. But they don't come in "well below market."
I personally feel OBLIGATED to give consideration to VA buyers. If you can't see the reasons for that, I would never engage in any form of transaction with you.
P.S.: OP, there are ZERO mortgage loan types with "100%" approval rates.
Last edited by Pfhtex; 07-12-2018 at 11:54 AM..
Reason: .
There are ZERO additional pages for sellers on a VA loan, compared to FHA.
VA and FHA have a page that indemnifies the buyer from loss of Earnest Money in case the appraisal comes in low - but this one page is really overkill, because low appraisals trigger re-negotiation on every deal unless specified in the contract.
Your note about the appraisals is fraught with hyperbole. Yes, VA appraisals can call for some quasi-cosmetic issues to be addressed. But they don't come in "well below market."
I personally feel OBLIGATED to give consideration to VA buyers. If you can't see the reasons for that, I would never engage in any form of transaction with you.
P.S.: OP, there are ZERO mortgage loan types with "100%" approval rates.
FHA is not a conventional loan. The OP said VA and conventional. Not VA and FHA.
The fact that the OP asked which to choose shows he/she is giving consideration to both buyers. They asked which one we would pick. I stated my response and why. I stand by it. Its a business transaction, therefore any choices made should be on the basis of the easiest experience for the seller with the highest return, not an emotional response to whether or not someone served in the military.
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.
honestly, you should have just linked to your other topic. or the topic you expounded on this subject numerous times.
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