VA Loan Requirements for Sellers: What You Need to Know

The VA loan is an outstanding option for military and veteran home buyers. But are there any benefits–or drawbacks–for home sellers?

VA loans are a popular mortgage option especially among military servicemembers veterans, and their families. As a seller, you may encounter buyers using VA financing to purchase your home. That’s why it’s important to understand the VA loan process from the seller’s perspective.

Overview of VA Loans

The Department of Veterans Affairs guarantees VA home loans, which are issued by private lenders The VA guarantee encourages lenders to offer favorable rates and terms

Some key benefits of VA loans for borrowers:

No down payment required
No private mortgage insurance (PMI)
Competitive interest rates
Can refinance with a streamlined Interest Rate Reduction Refinance Loan (IRRRL)

Because of these perks you may find VA buyers have more purchasing power than conventional loan buyers.

Pros for Sellers Working with VA Loans

VA loans have some inherent advantages as a seller:

Less strict underwriting: VA loans allow higher debt-to-income ratios and lower credit scores than conventional loans. This helps more buyers qualify.
Higher closing rates: VA loans historically close at a higher rate than conventional loans, per Ellie Mae data. This suggests a smoother closing process.
Increased buying power: With no required down payment, VA buyers can likely afford higher purchase prices than conventional buyers.

Cons or Challenges for Sellers

However, some aspects of VA loans may require extra effort from sellers:

VA appraisal: The property must pass a VA appraisal evaluating its condition, value, and compliance with VA Minimum Property Requirements (MPRs). If the appraisal uncovers issues, the seller may need to make repairs for the loan to be approved.
MPR compliance: To protect borrowers, the VA has baseline habitability standards. Sellers must resolve any MPR violations noted during the appraisal for closing to occur.

VA Loan Appraisal Process

The VA appraisal aims to ensure the property is safe, sound, and sanitary. Key steps from the seller’s perspective:

VA assigns a fee appraiser to inspect the property.
Appraiser checks for MPR compliance and provides a fair market value.
A VA Staff Appraisal Reviewer (SAR) reviews the report for completeness and accuracy.
If MPR violations are found, the lender will require sellers to make repairs before closing.

To prep your home for a smooth appraisal:

Make any needed repairs ahead of time
Declutter and clean the property
Gather utility bills, inspection reports, and other documents an appraiser may request

Tips for a Seamless Sale to a VA Buyer

With some preparation, selling to a VA loan borrower is straightforward:

Work with a real estate agent experienced with VA loans – They can advise you on any repairs or steps needed to pass the VA appraisal.
Review the sales contract carefully – Be aware of any VA-specific contingencies or clauses.
Understand VA closing costs – Closing costs with a VA loan can differ slightly from a conventional loan. Your agent can explain the specifics.
Prepare for home inspections – In addition to the VA appraisal, most buyers will obtain a private home inspection. Ensure your home is in tip-top shape.
Accommodate power of attorney closings – Active duty buyers may need to close via power of attorney if deployed. Be flexible on the closing process.
Support veteran homeownership – Although not a financial benefit, you can take pride in helping a veteran or servicemember purchase a home.

Key Takeaways

As a seller, take time to understand the VA loan process. With preparation and a veteran-savvy real estate agent, VA buyers can be great candidates for your next home sale. While financing any real estate transaction involves effort, take the proper steps and you can have a smooth closing with your VA buyer.

Frequency of Entities

VA loans: 17
VA loan: 12
sellers: 9
VA appraisal: 5
VA buyers: 4
veteran: 3
servicemembers: 2
real estate agent: 2
closing: 2
conventional loans: 2
conventional buyers: 1
conventional loan buyers: 1
military servicemembers: 1
lenders: 1
borrowers: 1
purchasing power: 1

va loan requirements for sellers

Are VA Loans Bad for Sellers?

Aside from fears over the VA loan appraisal process, some sellers may be worried about VA loan closing times. The reality is, VA loans may take between 40 and 50 days to close, according to Veterans United Home Loans. This is on par with the closing times for many conventional loans.

Power of Attorney Purchases

Military members must often travel or deploy. Some military families may try to purchase a home at their next duty station while still living at their current duty station.

Service members who can’t purchase a home in person may use a power of attorney to close their VA loan. Closing a sale with a power of attorney shouldn’t pose any additional issues for the seller, as long as sellers know that someone besides the buyer might be present at the closing.

VA Mortgage 101 (Seller Credits and What You Need to Know)

FAQ

What do VA loans require from the seller?

VA Loan Requirements For Sellers The property must pass the VA appraisal and meet Minimum Property Requirements. There are non-allowable fees a buyer may ask a seller to pay for. VA guidelines allow sellers to pay up to 4% of selling price in concessions.

What is the downside to a VA loan for a seller?

VA loans come with a funding fee, which is a one-time cost paid by the buyer to help offset the program’s expenses. This fee can be rolled into the loan amount, but some sellers might view it as an extra expense they need to consider when evaluating offers.

Is it hard to sell a house to someone with a VA loan?

The process takes longer when you sell to someone who is using a VA Home Loan than that of most other mortgages. One way to expedite this process is to make sure that there aren’t any repair issues with your home that may cause either delays for repair or an outright rejection of your home.

What is the maximum seller paid closing costs for a VA loan?

Veteran buyers can always negotiate the payment of closing costs with sellers. Sellers can pay all loan-related costs and up to 4% in concessions, which can cover prepaid items and more. In some cases, buyers may be able to utilize a lender credit to cover some or all of their closing costs.

Do I need a certificate of eligibility for a VA home loan?

To be eligible for a VA home loan, you must have a valid Certificate of Eligibility (meeting length of service and character of service requirements) and have available entitlement. (see Appendix B: Certificate of Eligibility (COE) above).

Who is eligible for a VA loan?

VA loans are a benefit for active-duty and veteran service members and some surviving spouses. You’re eligible to apply for a VA loan if you are on active duty and have served 90 continuous days. Here’s a look at who can apply and the requirements to qualify for a VA loan backed by the U.S. Department of Veterans Affairs.

Can a seller pay for a VA home loan?

The funding fee for a VA home loan can be paid by any party, including the seller. (*See Seller Concessions section in Chapter 8 of the Lenders Handbook). VA allows sellers to pay closing costs, discount points, and other concessions, which can amount to up to 4% of the loan amount.

What should sellers know about VA home loans?

Sellers should know that the Department of Veterans Affairs administers the VA loan program, but VA-approved lenders (e.g., banks, credit unions, and mortgage companies) originate the loans. This process, known as loan origination, encompasses the entire lending process, from your loan application to your purchase.