Home Buying in Temecula>Question Details

Carmen Frads…, Home Buyer in San Marcos, CA

What is the disadvantage of a VA no no?

Asked by Carmen Fradsham, San Marcos, CA Fri Aug 24, 2012

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In a competitive market like this one, it can be difficult to successfully negotiate the seller paying the closing costs into the offer. However there are ways around that with premium financing to help with closing costs. VA no no is the same as an FHA mostly becuase they both require minimum property standards. Either program requires an appraisal which the two are different appraisal criteria. VA is more picky on condition while FHA only requires all plumbing, electrical, exposed wiring, roof, heating and mostly the home is intact without any consideration for cosmetics of the home like carpet or paint. Either way VA no no is as lenient of a loan program as FHA but VA no no has no down payment and FHA Access is a half percent down with a minimum 580 fico. There is a funding fee for VA but can be financed as well and VA has no mortgage insurance and FHA does. I can have your approval letter within hours and have you out shopping today if you have access to one month paystubs or other income documentation, two month bank statements, last two years tax returns with all schedules and copies of drivers license and social security cards for each applicant, we can get your full approval today. Here is a link to homes in Temecula 3bd 2ba plus at $260k which is a maximum of $1,900 PITI and $1,300 down on FHA 4% 30 yr fixed rate loan I just quoted for someone else in Temecula a few minutes ago. Questions?
.
Click the following URL to see the Listings 3bd+2ba+ Temecula 260k 1,900 PITI or less:
http://www.mrmlsmatrix.com/DE.asp?k=1164647X4KQN&p=DE-11…

http://www.FrankandSheryl.com
http://www.Under640FicoScoreLoans.com
Sheryl Arndt, Broker
DRE# 01440252
NMLS# 297251
760-486-4225
0 votes Thank Flag Link Wed Sep 12, 2012
One disadvantage is the weak negotiating platform with a VA loan. Because of seller paid closing costs AND possible mandatory repairs, VA loans put you at a disadvantage compared to buyers with other types of loans or cash. Considering all offers are equal, a seller is going to want the easiest one to close escrow.

Best of luck...
0 votes Thank Flag Link Thu Sep 6, 2012
Hi Carmen,
Your interest rate can be higher - It depends on if there are credits from the seller towards closing costs.
Also...if you are looking to buy a distressed home that is less than in perfect condition VA will not close with certain repairs needed to the home. Another issue that could arise - some sellers are not willing to pay for the non re-occuring closing costs unless your offer is competive with an offer with out the same.
Good Loan if you don't have the down payment. If you have the down I would recommend a Fannie or Freddie loan. VA loans have a funding fee that is expensive. But, if you don't have the down payment VA loans are great loans.

Good Luck!
Scott and Shelley Weier
Cal State Realty
C2 Financial Corporation
951-587-2100
0 votes Thank Flag Link Thu Sep 6, 2012
VA loans are always zero down. So the other no in no-no comes from covering closing costs. Either the seller has to credit the buyer or the lender has to pay all the closing costs. If the seller credits, they may want a higher price so they can still NET the same amount.
Web Reference: http://www.socalvaloans.com
0 votes Thank Flag Link Sun Aug 26, 2012
Hi Carmen,
There are some really great informative answers below. You should choose an agent to assist you that will help you assess what kind of offer you should make on a home that will get accepted with this kind of financing. I have closed several deals with VA financing and would be happy to assist. VA loans are great loans, but everyone needs to be aware of their specifications up front so there are no nast last-minute surprises!

Thanks!
Sinead McAllister
Broker
McAllister Homes Real Estate
858-205-5215
0 votes Thank Flag Link Sun Aug 26, 2012
Some disadvantages of Va loans is that there is some Difficult Sellers, Sellers can be more hesitant to sell their home to a buyer who is financing the purchase with a VA loan, due to the strict conditions that come along with these loans. Since there is a limit to what fees can be charged to the buyer using a VA Loan, a seller could find themselves being forced to pay more at closing. Strict Appraisal Process, while this can also be seen as an advantage, VA loans require more strict home inspections and sometimes can make it extremely tough to buy a home "as is". For example, if a seller doesn't agree to certain repairs, a home may not be approved with a VA loan.
0 votes Thank Flag Link Sat Aug 25, 2012
Carmen, all the answers before me did a good job of explaining the dilemma. If you're patient you can get it done.
Good Luck!
0 votes Thank Flag Link Sat Aug 25, 2012
This question depends on whether you are the buyer or the seller. If you are the seller accepting a VA loan, then there are VA non allowables that cannot be paid by the buyer. This means that either the lender or seller must agree to pay these fees. Additionally, the seller would have to agree to pick up the rest of the buyer closing costs as well. Thus, the sellers net proceeds will be less than if he would of accepted a conventional loan offer.

If you're the buyer, its a great deal as it basically means no money out of pocket to you. Of course your closing costs don't just disappear. Either the seller has agreed to pay your closing costs or they are stacked onto your purchase price. So long as this "stacking" doesn't take you over the appraised value of the home, the deal is sound.
The VA no no is an excellent way to go, but it should be noted thats its not a given. The seller must agree to these terms.

Also, lenders may pick up your closing costs at a price. Usually this means a higher interest rate. Though this is not ideal, if a buyer doesn't the cash for said costs, it may mean the difference between homeownership and another year in that apartment.

Just to give you an idea of how great a deal it can be for a buyer, I recently helped a Marine purchase his first home with a VA no no. The seller paid all of his closing costs sung to the tune of 7800.00 The veteran put down 1000.00 deposit and will more than likely get all or most of this back at close of escrow. In the end, Buyer gets a house for 0.00 and doesn't have to pay his first payment til the following month.

The only disadvantage I can think of, is whether the seller will accept a VA no no in a multiple offer situation.

I hope this answers your question.
0 votes Thank Flag Link Fri Aug 24, 2012
Here are some plusses and minuses regard VA No No loans. For the buyer it's great for no costs. The seller however must pay all the costs of your loan. The biggest disadvantage is the ability to get your offer accepted during this hot seller's market. Most seller's are not willing to pay more than 3% of the buyer's costs. Add to that sellers are wary of the appraisal issues today and if the value comes in low due to highly competitive bidding, the property would be stuck with that appraisal for gov't loans for 120 days.

You can still purchase with VA successfully on certain properties. Working with a skilled professional Realtor and lender is imperative. Please contact me if you are interested in additional information or a referral to a skilled professional Realtor.
0 votes Thank Flag Link Fri Aug 24, 2012
A VA No No is a reference to a borrower using VA financing and paying no closing or settlement costs. Many people think the VA pays the Vets costs, but they don't.

The disadvantage or advantage depends on who or how the borrowers closing costs are being paid.

If paid by the seller, then great! No disadvantage.....unless you stacked the closing/settlement costs onto the price of the home and are overpaying for the home.

If closing costs are paid for by the lender, the lender is jacking up your interest rate higher in order to get the borrower a lender credit. At the end of the day, you are paying for those closing costs one way or another because the higher rate means higher payments for 30 years......and I guarantee you that amount will be more than the closing costs amount to.

If you are asking the seller to pay all your closing costs, it may become more difficult to get an offer accepted due to so much competition with other buyers.

Be careful who is offering your VA loan. Many lenders have been known to take 45, 60, or even 90 days to close a VA loan. If the seller sees an approval letter from one of those big credit unions who claim to offer special rates for VA borrowers, that could get your offer tossed in the round file very quickly.
0 votes Thank Flag Link Fri Aug 24, 2012
Here is a new blog post on the VA NO-No Mortgage http://homeloanartist.com/2014/01/va-no-no-mortgage-veterans/
Flag Thu Mar 27, 2014
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