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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.
Exactly. I have never used my VA loan and want to. I have cash but prefer not to use it.
I'm not sure the concern here. If one's bank has preaproved them for a loan at that price and amount down - what's the problem? Where they get their money and how much down should'nt matter to the seller?
This issue is interesting to me because I don't want any offer of mine to be declined for someone with a conventional loan, which I am able to get as well.
What do people mean by "safer"? If two offers are for th asking price.......they have bank preapproval letters.....why is one "safer"
Exactly. I have never used my VA loan and want to. I have cash but prefer not to use it.
I'm not sure the concern here. If one's bank has preaproved them for a loan at that price and amount down - what's the problem? Where they get their money and how much down should'nt matter to the seller?
This issue is interesting to me because I don't want any offer of mine to be declined for someone with a conventional loan, which I am able to get as well.
What do people mean by "safer"? If two offers are for th asking price.......they have bank preapproval letters.....why is one "safer"
Then get a different type of loan with a bigger down payment to make a stronger offer (or pay cash.) I have had people offer with a no money down loan and then get more desirable financing when their offer was rejected.
To summarize some of the points--
- VA loans can be risky because their appraisers may not properly value the house. This may leave the buyer to have to make up the difference if they want the house. The same house, appraised on a conventional loan, may have a much more realistic value and no need to make up the difference. A lot of headache if that happens to you on either side.
- In certain markets where there is a lot of competition, no money down loans are seen as less attractive to sellers than conventional loans with larger down payments and cash.
- Certain federally subsidized loans (including USDA, FHA) have the reputation of looser lending practices and attracting buyers with lower credit scores THOUGH THIS MAY NOT BE TRUE. Many sellers don't want to take the risk when there are other offers.
- Federal loans are subject to the whims of the federal government. If its shut down when your loan is in underwriting, good luck. In the Obama and current administration, the government has been shut down multiple times. Any seller who has been caught in this will never forget it (nor I am guessing will any buyer.)
Correct, it is a business transaction which you take very seriously, as do all sellers and buyers. I understand you where burned once or twice in the past, sh$t happens to everyone, we get over it. You can screen, judge, refuse and make assumptions based on how a buyer chooses to structure their offer, what type of loan they choose to use that a lender has approved them for or that they have earned, based on many factors, which you do not know, you assume you know, but you do not. Then add to it that poorly written letter with misspelled wording (people are stupid, aren't they?) from the buyer who (or is to whom?), fell in love with one of your many properties, and they look like a real P-O-S, don't they? No worries, you'll "eighty-six" them and voila! A cash buyer or a 20% DP buyer with an emotiioo approved lender will present themselves like always and the felicitation will begin once again due to her savvy ways.
Yes, I used the wrong word "boarder" as opposed to "border." It waz layte, eye waz veri tyred and ddnt gve a sht.
That is your opinion, that you have made over and over, ad nauseam. You are not the policewoman of the lending world, only over your portfolio of real estate. It is fine, even encouraged to have a point of view from personal experience, however, calling people dead beats based on zero down loans is beyond rude and a generalization from only your past experiences.
Diversify your portfolio. It won't remain a sellers market indefinitely, the market could tank and/if that changes, you will no longer be afforded the luxury of discriminatory selection.
To all VA buyers, good luck to you and thank you for your service.
I am sorry that you made an offer that the seller rejected. I am sorry you think this is because they saw you drive up in your car. I am sorry that you have had to understand that not everyone values the same things when it comes to buying property.
I wish you the best. Let's hope our paths never cross IRL.
Then get a different type of loan with a bigger down payment to make a stronger offer (or pay cash.) I have had people offer with a no money down loan and then get more desirable financing when their offer was rejected.
To summarize some of the points--
- VA loans can be risky because their appraisers may not properly value the house. This may leave the buyer to have to make up the difference if they want the house. The same house, appraised on a conventional loan, may have a much more realistic value and no need to make up the difference. A lot of headache if that happens to you on either side.
- In certain markets where there is a lot of competition, no money down loans are seen as less attractive to sellers than conventional loans with larger down payments and cash.
- Certain federally subsidized loans (including USDA, FHA) have the reputation of looser lending practices and attracting buyers with lower credit scores THOUGH THIS MAY NOT BE TRUE. Many sellers don't want to take the risk when there are other offers.
- Federal loans are subject to the whims of the federal government. If its shut down when your loan is in underwriting, good luck. In the Obama and current administration, the government has been shut down multiple times. Any seller who has been caught in this will never forget it (nor I am guessing will any buyer.)
Emotiioo, you are certainly entitled to your opinions about VA buyers, but I still must correct you when your facts are wrong. I've corrected some of these things before so I'm not sure you're reading my replies, but I'll put this out there for everyone else:
"- VA loans can be risky because their appraisers may not properly value the house"
The VA does not have their own appraisers. They do have their own appraisal requirements, but that's a different thing. VA loans use the same licensed appraisers as with any loan. As such, these appraisers will value the home the same regardless of loan type. Nothing about the process difference has any bearing on comps or value... They just have a different checklist for VA, mostly maintenance and safety issues about the house, like lack of smoke alarms or peeling paint or bad roofs. And any more... conventional loans have been calling out similar things, so I'm not sure they're really all that different these days.
I'll just leave your second post be, where you admit you very well may be wrong, but justify holding the opinion anyway because others might also feel that way.
"Then get a different type of loan with a bigger down payment to make a stronger offer (or pay cash.)"
Your first sentence in this post.You call the conventional loan stronger when it offers higher closing costs, a higher interest rate, and much less flexibility. Let's be clear on one thing... A veteran who CAN use VA loan benefit, would be just plain STUPID not to. There is NOTHING about going conventional, that is better for the borrower. I know you don't care about that... but the VA loan makes better business sense. Think about what you say are your justifications for holding on to your prejudice, that you believe you're selecting better buyers... in fact, you're not. Not if the only basis you're looking at is the loan type... not their overall qualifications.
Then get a different type of loan with a bigger down payment to make a stronger offer (or pay cash.) I have had people offer with a no money down loan and then get more desirable financing when their offer was rejected.
But you never did answer "why it matters to you?" I am not criticizing, just trying to understand is all. If someone drops $400k for the house I am selling, I have zero care where they got their financing from. If I am concerned about things like liquidity, I simply ask for a $10k deposit.
Quote:
Originally Posted by emotiioo
- VA loans can be risky because their appraisers may not properly value the house. This may leave the buyer to have to make up the difference if they want the house. The same house, appraised on a conventional loan, may have a much more realistic value and no need to make up the difference. A lot of headache if that happens to you on either side.
The VA uses the same appraisers everyone else does, they do not employ them, they hire a company to do it, the same company everyone else could hire. The same appraiser may be doing an appraisal for any sort of loan.
Quote:
Originally Posted by emotiioo
- In certain markets where there is a lot of competition, no money down loans are seen as less attractive to sellers than conventional loans with larger down payments and cash.
Yes, I am in the Miami market, one of the hottest around. Again, how does the amount down impact you? You are getting the price agreed to whether they tossed half down or none at all. The only exceptions I make are for cash buyers, because a lot of the things with the loan process are skipped, the only downside is they tend to much, much more picky and demanding, lol.
Quote:
Originally Posted by emotiioo
- Certain federally subsidized loans (including USDA, FHA) have the reputation of looser lending practices and attracting buyers with lower credit scores THOUGH THIS MAY NOT BE TRUE. Many sellers don't want to take the risk when there are other offers.
How does this impact you? The only way the deal could fall through is during underwriting, which for VA loans, is about 3.6% rate overall, more or less depending on the lender. A person with a 620 score and a FHA loan, and a person with a 780 conventional, is still at the end of the day, going to present you the contractually agreed price. It is not like you magically get deducted money because a person has a lower credit score than the other.
Quote:
Originally Posted by emotiioo
- Federal loans are subject to the whims of the federal government. If its shut down when your loan is in underwriting, good luck. In the Obama and current administration, the government has been shut down multiple times. Any seller who has been caught in this will never forget it (nor I am guessing will any buyer.)
The government has shut down twice in the last 25 years are so. Once under Clinton, and once under Obama. The shut down under Trump had zero impact on operations as it was during the weekend. So in any case, pretty rare.
Anyway, not criticizing you or anything, just wondering the logic of it. As a seller, the money is going to be all the same, regardless of where it comes from. Seems a lot of your thoughts are based on myth than reality, like the appraiser thing, in that the VA uses the same as everyone else. If you want more liquidity, just increase your deposit requirement amount like everyone else does when they have such worries.
"- VA loans can be risky because their appraisers may not properly value the house"
The VA does not have their own appraisers. They do have their own appraisal requirements, but that's a different thing. VA loans use the same licensed appraisers as with any loan. As such, these appraisers will value the home the same regardless of loan type. Nothing about the process difference has any bearing on comps or value... They just have a different checklist for VA, mostly maintenance and safety issues about the house, like lack of smoke alarms or peeling paint or bad roofs. And any more... conventional loans have been calling out similar things, so I'm not sure they're really all that different these days.
I'll just leave your second post be, where you admit you very well may be wrong, but justify holding the opinion anyway because others might also feel that way.
This is just something I will never understand why people continually think the VA employs appraisers, and they come out and always will appraise lower than the actual value. The VA will simply call the appraisal companies they are contracted with to go do the appraisal, and these are the exact same companies and people do do appraisals for every other loan type.
The only thing that may be different is not the appraisal itself, but what the loan company wants corrected, in that the VA cares a bit more about cosmetics, which in that case it is usually is up to the buyer to cover, or is included in the agreed repair costs in the contract.
Quote:
Originally Posted by Diana Holbrook
"Then get a different type of loan with a bigger down payment to make a stronger offer (or pay cash.)"
Your first sentence in this post.You call the conventional loan stronger when it offers higher closing costs, a higher interest rate, and much less flexibility. Let's be clear on one thing... A veteran who CAN use VA loan benefit, would be just plain STUPID not to. There is NOTHING about going conventional, that is better for the borrower. I know you don't care about that... but the VA loan makes better business sense. Think about what you say are your justifications for holding on to your prejudice, that you believe you're selecting better buyers... in fact, you're not. Not if the only basis you're looking at is the loan type... not their overall qualifications.
My two cents on those issues.
People usually with wealth building knowledge know that real estate lags behind about every other investment, and they are better to take out the low interest VA loan with zero down, and put their money in an index fund that will net them way more wealth over that 30 years than if they would have tossed it on a home down payment.
The only reason to use a conventional would be if the place would not pass VA approval, like a poor condition home, or numerous condos.
People usually with wealth building knowledge know that real estate lags behind about every other investment, and they are better to take out the low interest VA loan with zero down, and put their money in an index fund that will net them way more wealth over that 30 years than if they would have tossed it on a home down payment.
The only reason to use a conventional would be if the place would not pass VA approval, like a poor condition home, or numerous condos.
I guess you don't own property in any kind of hot market. The last property we sold appreciated well over what we had in index funds in a five year span of time and we got rent which covered the mortgage, taxes and netted a profit. It all depends on where you invest. Overall, you are correct. This is why one must choose their market carefully.
I guess you don't own property in any kind of hot market. The last property we sold appreciated well over what we had in index funds in a five year span of time and we got rent which covered the mortgage, taxes and netted a profit. It all depends on where you invest. Overall, you are correct. This is why one must choose their market carefully.
Lol, I own three in Miami, not including the one I reside in.
I have been through the entire cycle from the 2008 collapse to the hot market now. Over a 30+ year return though, even a simple index fund will out perform real estate. If you hop in and out, you can rake it in, but a person using a VA loan is probably not flipping. On my end, as a seller, I could not care less where the money is coming from.
You are just looking at a five year span, I am talking 30 years which is the life of the loan, and one of which the down payment is applicable to, as that is what they are applying for (outside the rare instances of 15 year loans).
Emotiioo, you are certainly entitled to your opinions about VA buyers, but I still must correct you when your facts are wrong. I've corrected some of these things before so I'm not sure you're reading my replies, but I'll put this out there for everyone else:
"- VA loans can be risky because their appraisers may not properly value the house"
The VA does not have their own appraisers. They do have their own appraisal requirements, but that's a different thing. VA loans use the same licensed appraisers as with any loan. As such, these appraisers will value the home the same regardless of loan type. Nothing about the process difference has any bearing on comps or value... They just have a different checklist for VA, mostly maintenance and safety issues about the house, like lack of smoke alarms or peeling paint or bad roofs. And any more... conventional loans have been calling out similar things, so I'm not sure they're really all that different these days.
Your first sentence in this post.You call the conventional loan stronger when it offers higher closing costs, a higher interest rate, and much less flexibility. Let's be clear on one thing... A veteran who CAN use VA loan benefit, would be just plain STUPID not to. There is NOTHING about going conventional, that is better for the borrower. I know you don't care about that... but the VA loan makes better business sense. Think about what you say are your justifications for holding on to your prejudice, that you believe you're selecting better buyers... in fact, you're not. Not if the only basis you're looking at is the loan type... not their overall qualifications.
My two cents on those issues.
Okay they used a different checklist. Point taken. But there is a difference, no? This is not the first post to point that out. In fact, I believe you even said that same thing, somewhere.
I could care less what is best for the buyer. In the question posed, I stated what I would prioritize. Again, this is not specifically about a VA loan. Its about anyone, anywhere, who thinks it is a good idea to buy with no down payment. I fundamentally oppose that idea and will not be entertaining those kinds of offers. I know its an agent's job to try and convince a seller to accept an offer and you have tried your hardest to show that a zero down loan makes sense. It will never be something I support. I am sure it is a great deal for a buyer who can get into a house for very little. But I don't agree with that practice. Sorry, I just don't. And I probably never will.
I do look at other things with any offers-- as I have said, I have a hierarchy. I just won't consider a buyer who uses loan vehicles that don't require money down. That is the first rung on the ladder, so to speak. From there, there are a lot of other factors. Again, this has worked. I am sure buyers I rejected found houses elsewhere. Everyone is happy. I don't understand why my failure to agree that certain types of loans are acceptable is upsetting. I will continue to use a screening process that works for me.
Lol, I own three in Miami, not including the one I reside in.
I have been through the entire cycle from the 2008 collapse to the hot market now. Over a 30+ year return though, even a simple index fund will out perform real estate. If you hop in and out, you can rake it in, but a person using a VA loan is probably not flipping. On my end, as a seller, I could not care less where the money is coming from.
You are just looking at a five year span, I am talking 30 years which is the life of the loan, and one of which the down payment is applicable to, as that is what they are applying for (outside the rare instances of 15 year loans).
Okay we can agree.
We are "hoppers." Diversified but yes, holding onto things for 5-10 years at most with residential and we have one commercial property we have held for 12 years but thats a totally different animal. Rehab, rent or live in it, sell at a profit. We used to flip but have not done that in a while.
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