Selling to a VA Home Loan Buyer
By Karina Gafford
In a late summer interview with the Huffington Post, Lawrence Yun, the Chief Economist for the National Association of Realtors, explained that several factors are pricing younger home buyers out of the real estate market. The combination of rising rents and home prices increasing between three and four times the rate of wages means that younger buyers simply don’t have the option of low rent wiggle room in their budget to afford to save for a down payment. Even if they can save for a down payment, the purchase price of the home is increasing at a far more rapid rate than they can save.
This combination seems to spell good news for military landlords, but bad news for military home sellers. The military is now largely dominated by Millennials, these younger service members who will soon comprise most of the market to which you are selling or renting out your home.
However, those selling in a market dominated by these military millennials have an advantage over those selling in a civilian first time home buyers’ market.
While tighter lending regulations and the financial challenges of saving for a down payment make home buying difficult at best for younger home buyers, military millennials have two big advantages when home buying
- Stable, monthly housing income from the Basic Allowance for Housing (BAH)
- Access to VA Home Loans that offer both zero down payments and lower credit requirements than alternative financing options.
Knowing these two facts, a home seller in a heavily military dominated market may want to consider familiarizing himself with the lending terms of a VA Home Loan to help plan for the high potential of receiving an offer from a buyer with a VA loan contingency.
Here are some ways that you can prepare to sell to a military homebuyer with a VA Home Loan:
- Look up the local housing rates for your area.
To do this, go to the BAH calculator on the Defense Travel Management Office’s website and input your zip code. You’ll also want to input a pay grade. Unless you live close to the Pentagon, you would be better served by estimating housing rates on low to mid-level pay grades, such as an O3 or E5.
- Estimate the mortgage payment for your property.
Using a mortgage calculator, such as MortgageCalculator.org or BankRate’s mortgage calculator, you can input your asking price (add two to three percent to the asking price to account for the VA funding fee for either first or second time VA homebuyers), property tax, and estimated homeowner’s insurance.
- Perform some simple math!
Does your home fit the VA Home Loan mortgage budget for military home buyers in your area? Do your calculations show that they will be able to afford the monthly mortgage payment for a zero down payment loan? If not, there are many options for homebuyers to purchase your home with an alternative loan product, such as state down payment assistance programs and FHA loans. If you’re in a tough selling market, consider working with your real estate agent to target marketing home buyers who may be eligible for these products. If your home sale price will fit the military home buyer’s budget, then great!
Let’s take a look at what else you may need to prepare to do to sell to these military homebuyers.
- Marketing to Military
When you’re marketing to sell to these military home buyers, know that you’re working with a unique clientele who shop on a time crunch unlike any other home buyer. You can read more about the rapid turnaround time in which military families buy homes in our post The Differences Between Military and Civilian House Hunting. This will explain more about why it’s critical to have great photos, a detailed description of your property’s layout, and ideally, a video home tour that will help make sure that you make it onto the short list of home tours for your ideal home buyer.
- Meeting the Requirements of the VA
- When you’re selling to someone who is using a VA Home Loan, realize that the process takes longer than that of most other mortgages. One way to expedite this process is to make sure that there aren’t any repair issues with your home that may cause either delays for repair or an outright rejection of your home. For a few hundred dollars, you can mitigate this situation by hiring an inspector who is familiar with VA requirements to review your home.
With some simple forethought and preparation, your home should be ready to market to military homebuyers. Here’s to a successful home sale!