Using VA Loans in a Competitive Housing Market
What are the best ways to use VA benefits to land a home in today’s competitive market?
Despite the solidity of VA loans, cash offers and historic competition have a way of leaving them in the dust of late. Because waiving inspections and accepting a lack of repairs on the seller’s part has become the new normal, veterans using their benefits are struggling to win existing homes in tough housing markets like Charlotte, NC. Realtor Thomas Watson, who helps servicemembers and veterans transition into homeownership, sheds some light on the challenges, benefits, and available options for those eligible for VA loans.
What are you seeing in the Charlotte area for families using VA loans?
Right now, it’s hard to get a VA loan accepted as an offer. VA loans have taken on a stigma in the last few years, because they do require a few extra steps. It’s been a challenge to remind sellers that they’re a solid type of financing.
One biggest hurdle is that the competition for homes in Charlotte and the low inventory in comparison to the demand means that sellers have come to expect that they won’t need to do any repairs on a home before selling. That’s fine for some buyers, but the VA has built-in safeguards that won’t allow a buyer to purchase a home that needs significant repair.
What do you see veterans and active military members looking for in a home?
In general, veterans and military members are looking at more than just sales price and money down. It comes down to lifestyle. They’re used to living around other military families, and that sense of community is a priority. Another common consideration is what safety measures are in place in a neighborhood, and what schools and childcare are nearby.
They also often look to make sure that services will be easily available. Are veteran services accessible in that region? Is there counseling and therapy available? So it’s not all about the home itself but also the area, the community, and the resources they’ll have there.
What does the process of getting a home approved for a VA loan entail?
It’s not that a home has to be flawless, but structural and safety-related issues like loose railings or steps can keep a VA loan from going through. To get a home VA-approved, we need to have a water test done if it’s on a well, we need to have a termite inspection, and we need to get those big aspects checked out.
These aren’t generally huge undertakings for repair, but since buyers are often competing against multiple other offers where inspections might be waived or cash is offered right off the bat, that process of getting the repair done and waiting for appraisal and the rest of the process starts looking less attractive to sellers. At the end of the day, those standards can hurt buyers in competition. I’ve worked with clients who have wanted to put an offer on a house, but couldn’t because the home wasn’t VA acceptable.
What do you suggest to buyers using VA loans in this market?
First, it’s important to find a real estate professional who has a background and experience in working with the military and the VA product. From there, find a lender who is well-versed in positioning the financial wellbeing of clients in front of prospective sellers. If you have a lender who’s education-focused and knows how to overcome the stigma that VA loans have, everyone will be better off. Education always wins the day.
Is building a home an option for veterans and active military members?
Yes. Despite the challenges, it’s definitely still worth it to use those VA benefits, so I like to look for a workaround to avoid participating in that risky, cutthroat competition of buying a home.
As long as a family will be living in the area for more than a couple years and has time to build their own home, that’s a really good option right now. The process requires a bit of a workaround, but it’s not too difficult.
To finance a home build, buyers start with a construction to perm loan, meaning they’ll have to pay for everything up front. Then, at closing, that loan can be converted into a VA loan as long as they’re using participating lenders with the option of a cash out refinancing, if necessary. It’s key to do thorough research early on to make sure the lenders can follow through with that entire process so that the VA loan is the end result.
Of course, the purpose of using a VA loan is to avoid having to take money out of your own pocket, so this option may look less attractive as buyers consider the money required to get the process started. There’s more research and laying groundwork required on the front end. However, in the end, anything put down ends up woven into the loan and works to build equity right off the bat.
At the end of the day, those who opt for homebuilding with a VA loan get the best of both worlds. They skip the competition, still get to use that VA benefit, and they’re happy because they’re able to design and live in a house that they’re helping build, where they get to tailor the home to their priorities and lifestyle.
A note on financing, from the Atmos team:
It helps to know what fees you need to save up for! When using a construction to perm loan and working with Atmos, a few fees include the deposit, plus land due diligence and earnest money. These are due once your offer on a lot is accepted by the landowner. As you start the building process with Atmos, we’ll put you in touch with the Atmos preferred lender, who knows and can follow through with the process of converting your construction to perm loan into a VA loan.
Ready to put your VA benefits to work toward your new custom home? Get started building your Atmos home and work with all the best experts, every step of the way.
