D.C. sellers are rejecting qualified veteran homebuyers
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The District's real estate market has been tough for all buyers during the pandemic, but veterans financing through the Department of Veterans Affairs tend to have an even harder time thanks to program incentives that concern sellers.
Why it matters: The VA's home financing program should make buying a home easier for veterans, but due to stricter appraisal and contingency requirements and what advocates call a lack of understanding of the program, it can prevent qualified buyers from keeping up in D.C.'s super-competitive market.
How it works: VA home financing is available to service members, veterans, and eligible surviving spouses. The VA works with private lenders and offers a home loan guaranty.
- The program is attractive to the military community because it offers low interest rates, limited closing costs, no need for private mortgage insurance, and the VA doesn't require a down payment.
What's happening: While all-cash offers are nearly impossible to compete with, other financing options are oftentimes chosen over the VA's program.
- Bright MLS data shows that of almost 10,000 homes sold in D.C. last year, only 3.4% were bought using VA financing.
"In general, in our industry there is a certain level of stigma for VA financing," local realtor and former GCAAR president Koki Adasi tells Axios. He says VA financing presented issues in the pre-pandemic market, but those issues have become more pronounced in recent years.
Both Adasi and Jan Brito, another former GCAAR president and local realtor, say about 25% of their respective clients use VA financing.
- Both realtors have had clients opt to use other financing products after being denied multiple times while using VA financing.
Yes, but: There are some real concerns that VA financing offers present for sellers.
- The VA appraisal process is strict, and may require sellers to pay for repairs that other financing options would not.
- Buyers using VA financing aren't able to waive financing contingencies.
Additionally, some agents and sellers aren't aware of the updates the VA home financing program has made. "It's not your grandfather's VA loan," Brito says.
- While most VA buyers are very qualified with high credit scores and cash in the bank, some sellers are scared away when they see offers with no money down.
- Plus, some sellers worry that the VA loan will take longer to close, but that's typically not the case, Brito says.
What they say: John Bell, acting executive director of the VA's Loan Guaranty Service, testified in front of the House Veterans' Affairs Committee last month.
He outlined some adjustments the VA has made to further support military buyers during the pandemic.
He also said the stigma surrounding VA financing largely comes from a lack of education.
- "VA believes that Americans want to honor the service of Veterans," Bell's statement said. "However, many Americans may not know that accepting the bid of a Veteran is a way to honor their service, without a loss to themselves."
LeVar Perkins, one of Koki Adasi's clients who has used VA financing on both of his homes, says the program does require patience and presents red tape, but he thinks the pros outweigh the cons.
- He bought a home in Southwest last summer after putting in nine total offers.
"I'm glad I have it available to me and my family and will continue to use it," the Marine veteran says of the program.