VA Home Loans Grow in Popularity, But Challenges for Buyers Remain

VA Home Loans Grow in Popularity, But Challenges for Buyers Remain
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This article by Leo Shane III originally appeared on Military Times, the nation's largest independent newsroom dedicated to covering the military and veteran community.


More homebuyers are using Veterans Affairs home loans than ever before, but advocates say misconceptions and red tape still present significant obstacles to veterans looking to use the program.


“For many sellers, accepting an offer with a VA-guaranteed loan is viewed as too burdensome and risky in terms of meeting appraisal standards and extended time to close a sale,” said Emily DeVito, associate director of the Veterans of Foreign Wars National Legislative Services, in testimony before the House Veterans’ Affairs Committee.


The home loan program is one of the most popular and best known benefits for American veterans. Individuals who qualify can receive lower interest rates, smaller closing costs and often do not need to make any down payments to finalize the loans.


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In fiscal 2021, department officials guaranteed more than 1.44 million loans valued at roughly $447 billion, a new record high and up 15 percent from the prior fiscal year.


John Bell, acting executive director of VA’s Loan Guaranty Service, attributed the jump to “historically low interest rates driving demand and increasing home values driving sales.”


But he also acknowledged that would-be homebuyers still face problems using the program.


“Misperceptions still persist among sellers and selling agents that VA financing is less than desirable than conventional loans,” he told committee members. “We believe more industry education is needed to break the stigma that veterans are anything less than highly competitive borrowers utilizing a financially secure loan program.”


A survey earlier this year by the National Association of Realtors found that only 39 percent of sellers were likely to accept a VA home loan for their home, compared to 89 percent who would accept a conventional home loan.


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Leslie Rouda Smith, president of the NAR, said her organization is working to improve perceptions of the loan and make it easier for realtors to navigate the special process.


“Every state is different and … [any complication] could derail the process, where the seller will go to the next person,” she said. “But I do know too that there are also sellers out there that will do anything they can to sell their home to a veteran, and a lot of proud realtors that would love to see our veterans have a roof over their head.”


Other advocates said that the negative perception of the program is part of the problem, but so are cumbersome requirements for it.


For example, typical home appraisals done before loan approvals take a few business days. Bell said VA authorized appraisals average 14.8 business days, potentially slowing down the home buying process significantly.


Additional waivers for the home loan process — to allow buyers to go slightly above home appraisals in their offers, for example — would make the program more competitive and desirable for veterans navigating the housing market.


And Rouda Smith said limitations on fees for realtors also play into concerns about the program. She and Bell both said they are working on that issue, trying to find ways to improve compensation for sellers without hurting veterans financially.


Bell said VA officials are working with advocates and Congress on potential changes. Lawmakers said they’ll continue monitoring that work in the months to come.


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