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Even though our first-time home-buying experience fell flat —leaving us jaded and angry—we almost made it through the entire process with our broker and realtor. I feel confident in relaying this experience to those who are interested in using a VA loan to buy their first home. There are questions that will come up that you may not be familiar with and you will have to make those decisions with the best of your ability. This can be overwhelming and stressful. I hope that some of what we went through can help you feel more knowledgeable going into this life-changing decision.
Mortgage Broker or Traditional Bank?
We decided to use a mortgage broker for our VA loan because he was a small, local business with a huge military clientele. He came highly recommended from my friend/realtor and had extremely low fees. That’s the difference between finding a small local broker and big bank.
I have many friends who have VA loans through Navy Federal and USAA, but a mortgage broker has a little more flexibility on interest rates and fees because they answer to fewer people. You may or may not pay more in fees if you go through a bank or broker. I recommend doing some individual research.
Our mortgage broker was awesome. He was always a call or email away and took time to answer all of our questions. He was quick in sending any information we needed, such as a letter of approval (allowing us to make an offer on a home), even if it was late in the evening. I hate that we wasted so much of his time when we ending up pulling out of the loan completely.
The inspection is one of the most crucial pieces in buying a home and you must have one completed if you are going to use a VA loan. It can make or break a deal because you can find out some really scary things about your home. If the seller refuses to fix the item or come down on the home price, you may have to walk away if you are short on cash to fix the issue yourself. This is a stressful time.
Once the inspection is done, you will have to choose what you would like to tell the seller to fix. You can pay for an expensive inspection where they look at the pipes, do Radon testing, and the general inspection, or you can pay less and have the minimum done. We paid for the fullest inspection because we believed we would absolutely get this home. It cost about $675.
Something important to note is that you can attend the inspection. Most inspectors won’t mind and will go over the details of what they found after the inspection is complete. This is a great learning opportunity for you and I recommend attending. I was at our inspection and I learned so much about the home! It was very informative.
Once you find out what the issues are, you give your objections. This is what you request the seller to fix. My realtor said that typically, you request 8-10 items to be fixed and hope that 4-5 of them are actually done. If you have a bigger, expensive issue, that is when you can begin negotiating on the price of the home, etc. This doesn’t always end wellfor the buyer.
We requested for two items to be fixed. We had extremely high levels of radon in the home, and the safety tag was missing from the electrical box. We requested that the seller fix the radon issue and have the energy company bring a new tag out for the box. The radon fix could be expensive, but the security tag was no biggy. Fortunately, he agreed to fix our two issues.
- Just because something needs to be fixed doesn’t mean the seller has to fix it. We were fortunate that our home was really well done and didn’t have any major issues.
- If the home deal falls through… you lose the inspection costs. It sucks. It’s horrible. Unfortuantely, it is the “risk of doing business.”
The VA Appraisal
When using a VA loan, you must have an appraisal done be a certified VA appraiser. This is typically done after the inspection. The appraisal is where our deal fell through. Just because a market is hot and the homes are selling like hotcakes doesn’t mean your home is worth what the seller is asking. A VA loan will only give you a loan for the amount the home appraises for.
We bid $315,000 on the home we wanted to purchase. Unfortunately, the home only appraised for $275,000. The seller wanted us to bring cash to the table to make up the difference, but we obviously didn’t have any cash to bring, as most VA loan applicants don’t. We wouldn’t have brought that money to the table anyways because the home wasn’t worth going $40,000 underwater for. Still, it was sad to see this happen, because if the seller doesn’t want to come down on the price, you lose the home. End of story.
This is why it is very important to have a good idea about a home’s value before you bid on it. We ended up walking away from the deal because we didn’t have any additional money. After that, we were out of time in our apartment and we didn’t want to go through the possibility of losing another house, not to mention moving our stuff into storage while we searched for another place.
Typically, your appraisal is wrapped up in your closing costs/VA funding fee, but if you pull out of the deal with your broker/bank, you will be footing the bill. A VA appraisal costs about $750 now. In the end, we lost out on about $1500.
Hopefully, your home will appraise for close or more than the amount you bid on it and you’ll have a seller that’s willing to work with you if it doesn’t appraise high. Once the appraisal is done and the seller/buyer agree on a price, things move forward quickly.
You will typically have your final walkthrough the day before you close on the home. This is to ensure that the seller has done all that he/she promised in the contract. It also proves that your home is ready to move into and there are no loose ends that need to be tied up.
Completing all of these items usually takes about 30-45 days. The day of closing should be a very exciting time. There will be a big meeting of all parties involved to sign paperwork, etc. After everything is signed and closing costs are paid, you will receive the keys to your new home.
Have you ever used a VA loan? Did I miss anything in the process? How was your experience?