VA loan saves the deal for client buying Victorian duplex

Mortgage broker: Liz Bayer, ProMortgage.

Property type: Victorian duplex in San Francisco’s Dog Patch neighborhood.

Appraised value: $1.555 million.

Loan amount: $1.243 million.

Loan type: 30-year fixed.

Rate: 6.50%.

APR: 6.64%.

Backstory: I had a client referred to me who wanted to buy a duplex in San Francisco and wanted a 30-year fixed conventional mortgage.

Initially, he was pre-approved; however, before he found the property, rates had gone up which negatively impacted his ability to qualify.

I asked him if he was a veteran and he said yes. However, his Realtor told him that this might negatively impact his ability to get an offer accepted.

I had heard this lament from other clients, which always puzzled me because VA loans are such a great loan product compared to conventional or Jumbo.

Apparently years ago, VA loans had a bad reputation for being slow and difficult to get done. Personally, I had found the opposite to be true. In my experience, I had found VA appraisals to be faster and the loan process to be equal to or better than conventional and Jumbo loans.

My client’s other concern was that he did not want 100% financing and wanted to put 20% down and he thought VA loans were only for 100% financing.

I told him that there is no requirement on a VA loan to only get 100% financing, and so squashed this myth, which seems to be a commonplace misconception.

In this transaction, by switching to VA, his rate dropped from the Conventional rate of 7.750% to the VA rate of 6.500%, more than a full point lower which lowered his monthly mortgage payment by $938/month or over $11,000 per year.

Also, for the VA loan, there is a process included for the appraisal to involve the Realtor to provide recent sales of comparable properties in the event the appraiser is struggling to get to the value of the purchase contract.

And this did in fact happen where the appraiser was having trouble finding comparable properties, so he invoked the “Tidewater” process, which allowed me to reach out to the Realtor to provide their expertise in identifying comparable sold properties.

No other loan type allows for the appraiser to be helped so this is yet another benefit of the VA loan. And now I have made a believer out of the Realtor.

VA loans are a benefit to our veterans and it is widely reported that they are underused. I hope that we will start to see VA loans gain popularity and acceptance, especially in this higher mortgage rate environment.

“Apparently years ago, VA loans had a bad reputation for being slow and difficult to get done. Personally, I had found the opposite to be true. In my experience, I had found VA appraisals to be faster and the loan process to be equal to or better than conventional and Jumbo loans.”