Unfortunately, the VA loan is the most restrictive type of loan in terms of appraisal (fortunate for the buyer however, not good for the seller). Bank foreclosures are almost always sold in as-is condition. Sometimes VA appraisers will require that certain repairs be made as a condition of a full loan approval. If the bank is not willing to make the repairs...there's no deal. The buyer has no house, and the bank has lost time on the market. If this is a house that you really want, see if you can obtain alternative financing, but first find out, if you can, why the bank won't agree to it. They're not obligated to give you an answer, but they do have the right to reject any offer. If you're looking in Woodbridge, there's plenty to choose from.

Unfortunately, it's not. The seller has the right to reject any offer based upon price and terms, which includes the type of financing.

If you are looking in Woodbridge/Dale City it is also very likely that there were multiple offers on the same house (prices are down, but sales in this county are up 22% over last year). If one of those was (for example) a convention/conforming loan, the bank most likely just took the path of least resistance.

Hi Renita,

It might help if you can get an explanation in writing as to what their specific objection of your financing package is based upon so you may have the opportunity to resolve the problem. My problems usually stem from the loss of value in a property failing to be sold in a declining area market. There are thresholds and ratios lenders consider in order to fund a purchase.

FHA loans are insured at approximately 82-85% of the current market appraised value.

VA loans are guaranteed at approximately 88-92% of the current market appraised value.

It may be possible that the ratio required by most banks may be off based upon the property's valuation, or the lender may be aware that the continuing decline in value may make your bid a moot point with the VA.

These theoretical funding thresholds represent a percentage of the current market value of a property, which may not necessarily mean that the loan balance, or your purchase offer, is causing the issue at hand.

Currently, I believe the Conventional threshold is approximately 85-93% of current market value (which fluctuates with the market and is usually lender-specific). I usually have had to check with the individual lenders to discover what their specific policies are for accepting and submitting bids on foreclosures/short sales. Some institutional policies are flexible and implemented at the discretion of a bank's management, while others are written down and "set in stone" as a list of strict requirements to be checked off and complied with. The ultimate goal of the bank is not to have a REO on its books, so they may decide to work with you if you can overcome their objection to your financing package.

I'm having a problem right now with an owner and bank hammering out a deal to sell a property in pre-foreclosure. We've been asking for the loan payoff amount since March and so far haven't been able to get the information in writing (or a verbal for that matter), which is holding up the acceptance or rejection of a current offer on the home. I understand your frustration at such a cryptic rejection regarding your VA loan. Hang in there. Good luck with your purchase.
Regards, C.

Ask your Realtor to find out why the bank isn't interested in a VA loan. Some lenders are leary of the old VA inspection. I have had banks successful accept VA loans for foreclosure properties so sometimes it is a matter of education of the asset manager and persistence on you and your Realtors part.

Hi Renita. No it's not discrimination. The seller can dictate what kind of financing is acceptable. VA loans have stricter requirements and perhaps the bank that owns the property is not confident that the property will qualify under the stricter VA underwriting requirements. I know that VA lending is not as strict as it used to be a few years ago and it's possible that the bank is not familiar with the current VA underwriting requirements. Perhaps your agent could find out from the bank's agent what the banks concerns are and your VA loan agent could address those concerns in a letter to the bank. Good luck.

please forgive the awful spelling on that last response!

Renita,

It depends. The listing agreement in my area has a box that asks "what type of financing aree you willing to accept". I almost always put Cash and Conventional Mortgage as my 2 choices. If somebody makes an offer with a VA loan or FHA, it is up to my clients as to whether he will accept it or not.

So, in my case, it is not descrimination. However, this could vary area to area.