Bias against VA loans frustrates Tacoma homebuyer
Buyers and sellers in the Puget Sound region are preparing for record-low housing inventories and a cutthroat summer season. Bidding wars have already begun — and it's not even summer.
One group of home buyers consistently loses out, even if they make a competitive offer: veterans and active duty military using loans backed by the federal Department of Veterans Affairs.
Help might be on the way.
The issue came to the forefront after a News Tribune's report last year showed that in busy housing markets military buyers using VA loans have a distinct disadvantage compared to buyers using other financing.
Veterans said they would make competitive offers on house after house were repeatedly turned down because real estate agents view cash or conventional loans as less of a risk or hassle than VA loans.
Now U.S. Rep. Derek Kilmer, D-Gig Harbor, says language in the recently passed $1.3 trillion federal budget means the VA must come up with suggestions for policy changes so veterans and service members can use VA loans in competitive housing markets like ours.
"This is intended to be a useful tool for the men and women who serve our country," Kilmer said of VA loans. "For a variety of reasons, it now has less utility. … I think this is particularly challenging in regions like ours, where we have large veteran populations and a hot housing market."
Within 90 days of this month's bill signing, the secretary of the VA is to report the agency's findings to the House Committee on Appropriations, of which Kilmer is the vice ranking member. The VA is supposed to identify anything from internal changes to new legislation to alleviate the problem veterans face in competitive housing markets.
The Pierce, King and Snohomish county region has grown rapidly in recent months. From April 2016 through April 2017, the tri-county region grew by more than 64,000 people. And because housing construction hasn’t kept up with the influx of new residents, housing prices are soaring.
Tacoma’s median home price in February was $325,000. And with just 1.15 months of inventory, buyers are sharpening their elbows.
With bidding wars now routine in Pierce County, veterans, wanting to make their offers stand out, have been advised to not use VA loans, even thought they carry great financial benefit.
Veterans who use federal loans make lower monthly payments and do not have to put money down when buying a home with a VA loan.
Whatever the agency finds to ease the problem, Kilmer said, he believes Congress will back veterans.
“Support for military veterans is something the Democrats and Republicans can agree on,” he said. “It was a provision that I advocated for, but I’m in the minority (party).”
Statewide, one in 10 homes was bought with a VA loan in the first four months of 2017, according to data from the Northwest Multiple Listing Service. Nearly one in five Pierce County buyers used a VA loan to buy a home. In Thurston County, the figure was more than one in four.
In multiple-offer situations in this housing market, listing agents prioritize most financing above VA loans, said Heather Hendrix, senior mortgage specialist with Directors Mortgage.
"The seller is typically trying to net out the most money with the least amount of possible financing issues," she said.
All-cash offers are ranked first, followed by conventional loans with large down payments. VA offers and first-time home buyers using federal loans are on the bottom of the pile, she said.
"My veterans are still having a really hard time getting their offers accepted," Hendrix said.
Appraisal delays eased after pay was bumped last year to $800 from $500 per home. These days, Hendrix said, appraisals are being completed in about 10 days.
Still, some sellers agents let past performance govern their current perception of the VA loan program, Hendrix said. And sellers might assume VA buyers are less qualified than those who use conventional loans because no down payment is required, she said.
"This is why it is so important for the VA buyer to strategize with their agent and lender to help position them as best they can when writing offers," Hendrix said.
Some real estate agents understand the VA program well,
Last year, said Jim Swanson, a Realtor with Windermere Professional Partners, the market was “very much against VA buyers,” and this year not much has changed.
These days Swanson is representing more sellers than buyers.
“I let the seller know there was nothing wrong with a VA offer so long as it was competitive,” Swanson said.