The U.S. Census Bureau reckons that there are nearly 19 million veterans in the United States. The Department of Defense claims that there are currently 1,092,937 active duty military personnel.
In fiscal year 2019, the VA guaranteed 624,544 home loans. So, out of nearly 20 million American military homebuyers who may be eligible for the VA-backed mortgage, only 3.12% applied and were qualified.
We can’t blame qualification standards for this puny statistic because qualifying is easy.
Instead, studies show that many in this vast group of Americans have no idea their VA benefits include a home loan with no down payment requirement. Even more of them are unaware of the ultra-low interest rate being offered by United Wholesale Mortgage (as low as 2.25%).
This is the perfect side-niche for agents who are former members of the military or grew up as military brats. But you don’t need military experience, or market your services near a military base, if you’re willing to put in the time to learn the unique needs and benefits of this group of people.
With Veteran’s Day right around the corner (November 11), we spoke with some agent friends who specialize in military homebuyers to gather some tips on how you can get started with this niche.
Sell military homebuyers on the advantages of the VA loan
The lack of a down payment requirement is probably the VA loan’s most attractive feature. It offers a way for those on active duty, veterans and qualifying widows or widowers to get into homeownership without having to save for a down payment.
As you know, with a conventional loan, if the borrower doesn’t put down at least 20 percent of the loan amount, the lender will tack on a private mortgage insurance (PMI) policy, adding hundreds to the monthly house payment.
FHA calls their PMI, MIP, for Mortgage Insurance Premium and it will stay with them for the life of the loan if your clients get an FHA-backed loan.
Not so with a VA loan. It’s guaranteed by the U.S. government, so lenders are willing to waive the PMI requirement.
Another advantage of the VA loan for your military clients is that not only will they not have to come up with the huge chunk of money for a down payment, but closing costs won’t be a problem either. The VA limits the amount the lender can charge.
Finally, the VA has no minimum credit score requirement. As you know, however, the lender might, so advise your client to shop carefully for a loan. A good place to start is this chart at USNews.com.
But understand the disadvantages
While there’s no down payment requirement, the VA loan does carry a funding fee.
This fee varies, according to whether or not the service member paid a down payment, and the amount paid as well as whether or not this is the first time the individual has used the loan (the first use is cheaper than any subsequent use of the VA loan).
Learn more about 2020 VA loan fees at VA.gov.
If your military client is looking to become a landlord, he or she cannot use the VA loan for income property.
The VA only guarantees part of the loan, so, depending on lender, there may be additional financial requirements.
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Then, there are the service requirements
- The veteran must have acquired 90 consecutive days of active duty during wartime
- During peacetime, the above requirement is lengthened to 181 days
- National Guard members or Reservists are required to prove six years of service
- A veteran’s widow or widower are eligible to apply for the VA loan as long as the service member died in the line of duty.
The veteran’s Certificate of Eligibility (COE) is his or her ticket to VA loan approval. The lender can obtain it for them via an online system.
And, property requirements
The VA stipulates what they call “minimum property requirements (MPRs).” According to the VA’s website, these requirements “… help ensure that the property is safe, structurally sound, and sanitary. The scope of MPRs also includes issues related to the property’s location and legal considerations.”
Help your VA loan clients make an informed decision about homes they view by familiarizing yourself with the MPRs. Chris Birk, at VeteransUnited.com, has written a brilliant walk-through of the them.
Finally, the contract will be just a bit different than the standard one. You’ll need to ensure, among other things, that you include a VA Escape Clause, a copy of which can be found here, at VA.gov.
Get the word out that you are every military homebuyer’s dream real estate agent
Not too long ago I was served an ad from a lender in my Facebook feed. It was super simple:
No mention of the super low mortgage rates that United Wholesale rolled out. In fact, there isn’t even a phone number in the ad, just their site’s URL.
Yet the responses came rolling in. Last I looked, there were about 150 of them, most begging for help to buy a home with a VA loan.
It’s a niche full of potential military homebuyers who need help.
And you’re just the person to lend a hand.
Need help reaching out to leads? Schedule a demo with us today to see how we can help!
Want to give your real estate marketing some extra oomph? Here’s how you can use social proof to show the world you’re the best agent for the job!