VA Benefits Helping High Dollar Purchasers

I recently opened escrow on a $2.2M listing (see here for my recent sales) . The buyers were a super power couple with clearly income to spare. The husband was a veteran and as well qualified as they come. What made the file unusual was that the buyer chose to use their VA eligibility to finance the purchase. In other words, this was a very high balance VA loan.
Many Realtors frown on VA financing as do their sellers. There are certain costs  a seller must absorb like both Section 1 and 2 of a wood destroying pest inspection and a VA buyer can’t pay escrow, although there are ways around this. A typical VA loan requires as little as zero down but has a high balance loan cap, which while varying from county to county, can reach as high as $679,650. For most of greater Los Angeles area this is the cap. But VA doesn’t actually have a loan limit and a VA borrower who has sufficient eligibility, can seek a virtually unlimited loan amount. The catch is that borrower must put down 25% of the loan exceeding the county cap. ie: A vet buying a home for $1,679,650. The amount borrowed exceeding the county cap is $1,000,000 ($1M + $679,650 = $1,679,650). The vet then has to put 25% down on the excess $1M which is $250,000, while putting zero down on the first $679,650. This is great for a vet because a normal borrower would have to put 20% down on the purchase amount of $1,679,650 which would be $335,930 (20% of $1,679,650) while the VA borrower only has to put down $250,000 (25% of the amount above the cap). That’s a difference of $85,930 that the vet doesn’t have to put down. Other VA benefits include a typically lower interest rate and up to 60% back end debt to income ratios. Back end ratios are the mortgage plus any other debt divided by gross income vs. front end which is only the mortgage divided by income. The benefits of doing a VA loan therefore, are substantial (contact me for more info). 
I handled another purchase at $1.2 in January also a vet buyer, using their VA benefits to finance the purchase. In this case, instead of putting 20% down on $1,200,000 ($240,000), the buyer only had to put 25% on the borrowed money exceeding his cap of $679,650 or $130,088. This represented a reduced down payment to the tune of $109,912! That’s huge.
Finally, what I’d like to leave you with is this: There are lots of vets who are well established in their post-military careers.  A vet who at 20 served in Afghanistan in 2002, is now 36 and a vet who served in the 1991 Gulf War, is already in their late 50’s and making the best money of their life, so we aren’t talking only about young first time buyers just getting started after their service. As a seller, selecting a veteran buyer means you are not only on the moral high ground but you can feel confident that from a financing perspective, regardless of purchase price, VA financing can work just fine and in many ways, even better than conventional financing.

About Tim Freund

Tim Freund has been a licensed real estate agent/broker since 1990. He spent 14 years as a new home sales rep, ran his own boutique resale brokerage for 5 years and is currently an Estates Director for Dilbeck Estates/Christie's International Estates in Westlake Village, Ca. Tim is a Certified Residential Specialist (CRS), an Accredited Buyer's Representative (ABR), a Corporate Mobilty Specialist (CMS) and a Senior Real Estate Specialist (SRES). Tim has successfully negotiated a loan modification for a client and has been a professional short sale negotiator. Tim sells along the Los Angeles and Ventura County lines, “from LA to Ventura..”. Tim has been married 31 years, has 2 children, is a native Californian and has been a resident of the Conejo Valley since 1991.
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