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Are Veteran Affairs Loans Helping or Hurting Our Soldiers?
This past summer, an Air Force Staff Sargeant hoped to buy a home for his family using a home loan from the U.S. Department of Veteran Affairs. 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.
He and his wife made several offers on foreclosed homes in California using their Veteran Affairs 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 no 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 family lost a bid on a foreclosed home in California. The property sold eventually sold to a cash investor who paid a lower price.
Usually the biggest problem with VA loans is the appraisals. The buyers may be willing to pay a certain amount for the home, but if the appraiser does not agree that the house is worth that much, the seller ends up accepting a lower amount.
At the same time, many 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. As a practical matter, many of the properties that are in foreclosure or in financial trouble are being bought with cash, because standard financing is not designed for this kind of property.
According to data from Real Estate Agents Reports on Home Purchases and Mortgages - 2009, investors, who usually pay cash for the home, are buying more than half of the foreclosures sold by banks.
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.
Many military families are left out in the cold and are forced to search endlessly for a home. I don’t know about you, but this does not seem fair to me. What do you think?