Several House members are concerned that the Department of Veterans Affairs home loan program is falling behind in an increasingly competitive housing market, putting veterans at a disadvantage to buyers who utilize commercial loans.
In a letter to VA Secretary Denis McDonough this week, 65 congressmen warned that just a small percentage of property sellers now favor VA loans and that, as a result, veterans are looking for other options. The lawmakers wrote that the Department of Veterans Affairs should "examine how VA mortgage loans can compete in today's marketplace and guarantee veterans have to negotiate power throughout the home-buying process," the lawmakers wrote.
Private lenders supply the loans under the VA home loan program, but the VA guarantees a portion of the loan against failure. Borrowers can acquire better conditions than they would otherwise be able to get, such as no down payment, cheaper interest rates, and fewer closing expenses.
However, the program also necessitates a VA appraisal of the home and other qualifying requirements, which can prolong the closing process and irritate buyers and sellers.
"Historically, VA mortgage loans have been enticing and competitive to sellers," the congressmen said in a letter that was made public on Thursday. "Unfortunately, the present housing market, as well as the surge in cash and conventional loans with waived stipulations, might make it difficult for veterans to compete with other purchasers."
In the same survey, 94 percent of sellers indicated they were more inclined to accept a conventional financing offer, compared to 1% who said they were more likely to receive a VA loan offer.
According to John Bell, the acting executive director of the VA's Loan Guaranty Service, VA assessments can take an average of 14.8 business days to complete, compared to a few days for a non-VA loan.