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Sheryl Arndt, Broker
Best of luck...
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.
Scott and Shelley Weier
Cal State Realty
C2 Financial Corporation
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!
McAllister Homes Real Estate
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.
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.
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.