Since 1944 the Federal VA mortgage loan guaranty program has helped those who serve our country realize the dream of home ownership. Because VA loans are backed by the government you can buy a home with no down payment, no PMI, competitive interest rates, and it is easier to qualify because there is less risk for lenders.
It’s a fabulous program, but military buyers really need to do their homework before selecting a lender to make sure they are actually getting the best deal. You need to know that the loan package you have negotiated will put you in a strong position as a buyer – it’s very competitive here. Many lenders who will lure you in by saying they “serve those who serve our country,” may not be telling you the whole story, and it may not serve you well.
Some lenders to the military count on the fact that you already have a relationship with them for other services. While they do an excellent job at providing great rates for their core services, they are counting on your loyalty to them to insure you will also get your mortgage loan from them as well. Before you do that there are a few things you need to understand.
You need to shop for the best rates and a lender who will pay most or all of your closing costs! Don’t let your “loyalty” to an “affinity” group you may already have a relationship with, or a company advertising “great rates” for veterans, mislead you into thinking they will give you the best rate. They are counting on your “loyalty” to them to make a profit on the deal.
Yes, it may be more comfortable to talk to them initially rather than review your finances with a new potential lender who doesn’t know you. You may be offered “good” rates, “rebates,” and a referral to a local buyer-agent they have a “relationship” with. We have every respect for these groups. They are excellent at their “core businesses,” and may give you great service in that realm, but many do not offer competitive rates, nor will they pay your closing costs, usually about 2 ½% of the purchase price of your home. This is substantial cash you must have at settlement. On those “rebate” programs, you are paying long-term with higher rates, and their local agent referral program may result in a relatively inexperienced or “part-time” agent who won’t help you find better rates.
Here is the most important reason you need to shop for the best deal. For military and all home buyers, the Northern Virginia market is very competitive. If you are in a situation where there is more than one offer on the house you want, you will not be in a strong position to win if you are asking the seller to pay your closing costs and another buyer is not – this is a set up for failure every time.
You may not even know the real reason why you lost out on the house, because the local referral agent is not willing to risk future referrals by recommending another lender who will pay your closing costs –it’s a very uncomfortable situation for them. After almost 30 years of working in residential real estate in Northern Virginia, our advice is “do your homework up front.” Find the best lender with the best deal for you, and find a buyer agent focused only on your needs and goals. Blind loyalty is not worth the price in the long run.