Surging demand is making the real estate market especially competitive at the moment, which means it’s more important than ever for prospective homebuyers to prepare for their purchase in advance. For members of the armed forces and veterans, special financing is available through the Department of Veteran’s Affairs (VA) that could make homeownership more attainable, even amid all the competition.
Kevin Parker, vice president of field mortgage originations at Navy Federal, spoke to Bankrate with advice for military borrowers. He noted that some sellers can be turned off by the perception of extra bureaucracy involved in VA-backed purchases, so it’s a good idea to work with lenders and agents who are familiar with the process.
Our conversation has been edited for length and clarity.
What are the current conditions in the mortgage market?
What we’re seeing in a lot of our markets, and keep in mind we lend in all 50 states, we’re definitely seeing a seller’s market. Potential buyers are needing to be more aggressive and more competitive in how they compete for offers. We’re seeing a lot of risky things being done like waiving home inspections, waiving appraisals and higher offer prices.
What do servicemembers and veterans need to know about getting a mortgage in this market?
I think it’s very important for servicemembers to understand how VA loans are beneficial to them and also how they’re perceived. The whole purpose of VA administration is to make sure people are purchasing viable real estate property. That’s why we have requirements to do home inspections if you’re going to do a VA loan, same thing with appraisal. We want to make sure you’re not buying a lemon.
That’s why the VA manages the appraisal process themselves.
In a seller’s market, it can sometimes be perceived as it’s more difficult. As a listing agent, for example, if you have one offer that’s a VA loan, one offer that’s a conventional loan and one offer that’s cash, most listing agents would prefer to go with cash.
We think it’s important that servicemembers are telling the potential seller that they have their certificate of eligibility. On top of that when you give them the preapproval letter, it’s not that this is a more difficult product, it means there’s more backing.
On pricing, VA rates are fantastic, some of the best rates you can get. Regular rates are in the 3 percent range today [editor’s note: this interview took place on April 21], but VA rates are as low as 2.3. Ultimately what that means is servicemembers can have a higher affordability because the payments are lower. You can buy more house or have a better budget opportunity. Nothing can compete with VA prices.
If you don’t come from a lending world and you’re not familiar with interest rates, you may not realize how great the VA rates are. These are the best rates a buyer can get.
In a competitive seller’s housing market, what can VA loan applicants do to make themselves stand out?
We highly recommend working with Realtors or real estate agents who are comfortable and familiar with VA lending. They know how to position a VA loan compared to other applicants or contract offers. We really want to rely on our Realtor partners to make that viable. We want to make sure our Realtor partners understand that, too.
Typically when you’re going through buying a home we do want to advise buyers that if you’re considering buying a car at the same time, or if you’re considering buying furniture or leasing furniture, that you wait. It could increase your debt-to-income ratio. It’s not recommended to apply for lots of financing at one time. We recommend buyers or all consumers should have awareness about their credit in general. Freecreditreport.com is a tool where you can go and get access to that every year.
Navy Federal can give you access to your credit score based on certain products you have with us.
Anything else people should know?
We highly highly recommend working with Realtors or real estate professionals and lenders who specialize in VA lending. Navy Federal, we have a 40 year history of doing mortgage lending, that we take a lot of pride in. Working with lenders and working with real estate professionals who are familiar with VA lending makes the process much smoother.
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- 5 steps to shop for a mortgage without hurting your credit score
- You don’t have to make a down payment on a VA loan. Should you anyway?