Veterans are finding it difficult to buy homes with VA loans in the hot Fresno housing market, a reflection of what is happening across the country.
In addition to the competition from cash offers and conventional loans, veterans face hurdles created by misconceptions about VA loans.
However, there is a road to success for veterans hoping to buy a home. Real estate experts advise finding a real estate agent with experience representing veterans.
The Fresno veteran’s long struggle for a home
Linda Cater, who served in the US Marine Corps 21 years ago, has been fighting for a home in Fresno since early January.
Cater started looking for homes that were on the market but said the agents she had worked with first weren’t very helpful. Then she teamed up with Beverly Grabel, a broker attorney for Vylla Home Inc.
Grabel, who served in the army, works to help veterans buy homes. She helped Cater with a bid for a home by contacting the seller and negotiating the closing costs, a significant win in this highly competitive market.
Cater had never used her VA loan or owned a home, but decided they needed more space as her mother and eldest moved home.
Eight years ago she moved to Fresno with her two youngest children after going through an emergency and becoming homeless. With the help of Home front, a 20 bed home in Fresno helping homeless female military veterans and their children get on their feet. She has been working for the club for over five years.
Uncertainty over when the house will be ready to move in
Cater felt that after several unsuccessful offers, she didn’t have a great chance of buying a home. Finding a home at a price she could afford – $ 240,000 – was a frustrating challenge.
Now that she has successfully found a house, it is difficult for her to close as the tenants continue to live in her to be home soon.
With her future home on hold for more than 90 days, Cater will now have to pay a penalty fee for closing costs until the current tenants move out.
She expected to move in soon and was flexible throughout the process. However, since the eviction moratorium has been extended to September 30th, she does not know when to close the house.
“At this point, I don’t remember, but when I look at the market I have no choice,” said Cater. “It will still be cheaper than any other house in the long run – I’ll wait a few more weeks.”
VA loans most beneficial but often overlooked
For current and former military personnel like Cater, a VA Guaranteed loan is the cheapest of the three most popular loan programs. It is characterized by low interest rates, no private mortgage insurance, and no down payment.
However, VA and FHA loans don’t have much of a chance in a seller’s market, says Grabel. Despite the odds, new VA data from Veterans United shows that VA purchase credits for Gen Z veterans – generally ages 18 to 24 – rose 123% year over year. Millennials seeking VA purchase loans were up 16% year over year.
VA loans are often chosen last compared to other loan programs, and part of the reason is due to the misconceptions many agents have about them.
“The common misconception is that VA loans are going to last forever, and that they will default, and that there will be valuation issues, and that’s just not true anymore,” Caitlin Turkovich, a Las Vegas-based branch manager of Union Home Mortgage, told CNBC.
Which loan programs are the most successful?
Dave Kidder, a real estate agent at Keller Williams Fresno Realty, says that in a typical year, 10 to 15% of VA loans and 50 to 60% of FHA loans are accepted. At the moment, he said, less than 5% of the two loans are being accepted.
“Unfortunately, the FHA and VA have not always been able to compete with traditional credit and cash,” said Kidder. “It breaks my heart to hear of a situation where the only criterion is that they just didn’t have the money and therefore didn’t accept it or were afraid of being valued, and both of these are stereotypes in the market that isn’t absolutely true. “
Recent data from the National Delinquency Survey show that VA loans had the lowest foreclosure rates in the United States
After the COVID-19 pandemic, a report from the Mortgage Bankers Association shows that default rates for all mortgage loans rose in late 2020, with FHA loans rising to a record high of 15.7% late last year.
As for the month of August, overall default rates are already falling, but the FHA’s default rates are still higher than any other mortgage loan.
Real estate agents have no understanding of VA loans
Nonprofit organizations like the Veterans Association of Real Estate Professionals (VAREP) focus on helping veterans buy a home, but they also work to educate real estate professionals about what a VA loan is and how it works.
Bob Voss, the Fresno Chapter board member for VAREP, says agents often know more about other loans than VA loans.
“If you are making an offer on a house and there is a realtor to represent the seller, he will be able to present the offers to the seller and then also be able to tell them, OK, this is a cash offer, this is a conventional one, this is an FHA and this is a VA, ”said Voss. “If the seller starts asking the real estate agent about the different loan types again, he will have this stigmatism, most likely the VA loan will last longer and it will be harder to get through. ”
What can veterans do when they want to own a home?
It’s about being proactive, says Grabel. She looks for potential sellers who may be thinking of selling their homes before they’re even in the market, and constantly reaches out to other realtors and sellers with well-crafted offer letters.
“The best thing veterans can do right now is to read up on the different types of loans that are out there and pay attention to the real estate agents they choose to help them buy a home,” said Grabel. “Because if they don’t know how to present their offer, it will be difficult for them to accept the offer.”
Fresno’s housing market is still struggling to meet demand
Kidder says the Fresno market has seen a significant decrease in available housing.
Before last March, there were over 2,200 homes on the market, up from 650 homes available today.
About 9,500 homes are sold in Fresno, Madera, and Kern Counties in a given year.