This past summer, Air Force Staff Sergeant Jason Goul hoped to buy a home for his family using a loan program backed by the U.S. Department of Veteran Affairs. As reported by in the San Francisco Chronicle, he wanted to have his wife and two children settled into their new home before he was sent overseas to the Middle East in August. Goul and his wife Judith (seen at left) made several offers on foreclosed homes in California using their "VA loan," but none were accepted.
VA loans are guaranteed mortgages provided to the country's 25 million living veterans (or their surviving spouses) to purchase homes with little or zero down payments. It sounds like a great deal, but the loans do come with certain restrictions around appraisals and inspection that are shutting service members out of buying foreclosed properties.The Gouls lost a bid on this foreclosed home in Fairfield, Calif. The property was eventually sold to a cash investor who paid a lower price.
According to Guy Cecala, CEO of Inside Mortgage Finance, this is not unusual for buyers using VA loans.
"Usually the biggest problem with VA loans are the appraisals," says Cecala. The buyers may be willing to pay a certain amount for the home, but if the appraiser doesn't agree that the house is worth that much, the seller ends up accepting a lower amount.
At the same time, Cecala says, a lot of these homes may have problems that are not easy to detect. That causes issues with the financing as part of the VA inspection process.
"Any listing is going to minimize any potential problems," says Cecala. "As a practical matter, many of these distressed properties are being bought with cash, because conventional financing is not designed for this kind of property."
According to data from Campbell Survey's Real Estate Agents Report on Home Purchases and Mortgages - 2009, more than half of the foreclosures sold by banks are being bought by investors, who generally pay cash.
Because the VA buyers may not be putting money down, if the home needs thousands of dollars in repairs, which it likely does, the soldier could quickly end up in trouble and then default on the loan.
Some of these issues are not restricted to VA loans; FHA loans also have restrictions around appraisals and inspections.
Service members who are looking to buy their first homes did get some good news recently. The House of Representatives recently voted to extend the popular $8,000 first time buyer credit for another 12 months for members of the military, Foreign Service, and intelligence corps who served at least three months of qualified overseas duty in 2009.
According to the SF Chronicle, the Goulds are still searching for a home.
Good Luck to all.
Hello Ms. Robin Forss,
This letter is to document our phone conversation Friday October 9, 2009. First I want to thank you for your phone call at a time when you’re headed to vacation. This matter began lest than a month after my home closing when (4) homes went up for sale thousands less than my home. When I requested the appraisal that I paid for but never got I found that theses houses as listed were within the range of the price per sq ft on my appraisal! Plus I found that my house was outside the price per sq ft of this appraisal. I also know that homes usually sale less that listings which made my situation worst!
Currently the VA have found Wells Fargo deficient by not sending me my appraisal as prescribe within the VA policies. I feel if I had this appraisal I could have made my offer to buy to Dominion Homes using price per sq ft. Whether they would have taken it or not will never be known. This is the basis of my complaint.
Now we do have a deficiency as a matter of fact and you asked me what I wanted the VA to do?
The following is my answer:
1- Perform more audits. This you said you currently do and did do for my matter. Thanks.
2- Perform surveys requesting VA buyers to write about their buying experience. This you said will be proposed to your boss. Thanks.
3- Provide a message board of all lenders that are deficient to any VA policies and post their answer if there is an answer explaining how they will fix the deficiency and when they will fix it.
4- Warn the lender that they can be removed from being a VA lender if they repeat deficiencies. I have always found that business people pay attention when they’re hurt in the pocketbook.
I believe these (4) improvements will protect the VA home buyers and give him/her the tools to be a smart home buyer. Please keep me informed of the status of these improvements.