A seller rejected my VA loan offer. What can I do now?

Peter Warden
The Mortgage Reports editor

Are VA loan offers bad for sellers? 

You found your perfect home. But the seller rejected your VA loan offer on the grounds that VA loans are too troublesome.

That seems to be happening more and more. And yet there’s no good reason for it. Because VA loans are as good for a seller as any other type of mortgage.

This happens because some sellers — and even their agents — harbor misconceptions about the VA loan program that make them hesitant to accept VA offers.

In this article, we’ll explore those myths along with the best ways to negotiate and get your VA offer accepted.

Verify your VA loan eligibility. Start here (Oct 17th, 2021)

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Why don’t sellers like VA loans? 

Many sellers — and their real estate agents — don’t like VA loans because they believe these mortgages make it harder to close or more expensive for the seller.

But those issues are largely myths stemming from the past. VA loans have changed a lot in recent years and now, they’re generally no more difficult or expensive for sellers than any other loan.

The most common myths are that VA loans:

  1. Are less likely to close than other types of mortgages
  2. Take ages to reach closing
  3. Have appraisers who are slow and routinely undervalue homes
  4. Require sellers to cover all the buyer’s closing costs

None of those applies today.

2021 data shows that VA loans only take a few more days to close than conventional loans on average. And the idea that sellers have to pay closing costs for VA buyers is simply untrue.

In short, there’s no reason a seller should reject your purchase offer simply because you’re using a VA loan. But, due to misinformation, some might anyway.

So what can you do to get your offer accepted?

Verify your VA loan eligibility. Start here (Oct 17th, 2021)

6 Tips to get your VA loan offer accpeted

There are a number of steps you can take to help get your VA loan offer accepted — even by a wary seller. But it will take some forward planning and negotiation.

Here’s what to do.

1. Get the right buyer’s agent

Start by retaining a buyers’ agent who is really experienced with VA loans. This agent represents your interests for free (the seller almost always pays all agents’ fees, but double check when you appoint your agent).

When the agent comes to submit a VA loan offer for you, they can explode any false beliefs about VA loans that the seller and seller’s agent might have.

If you get to meet your seller in person, head off later problems by talking through how the VA loan works. Yes, it provides buyers with extraordinary privileges. But the mortgages are 100% legitimate, government-backed loans. And you earned every one of those privileges through your service to your country.

2. Find a responsive lender

Choose your VA lender with care. Yes, you want a great deal on your mortgage. But it helps to have a loan officer who’s happy to field calls from listing agents. Ten minutes on the phone with a loan officer can turn a listing agent from a VA-loan skeptic into an advocate for them — and you.

Some suggest that using a local lender or broker can be helpful. Because listing agents feel more affinity with people they might meet in person. But don’t end up paying a significantly higher rate and closing costs than necessary just to keep your loan local.

3. Make a bigger down payment, if possible

Some sellers and listing agents are freaked out by the idea that VA loans require no down payment. They assume that you’re not a serious homebuyer if you’re not putting down 3% or more.

This is, of course, rubbish. But, if you have plenty of savings or are a repeat buyer with sufficient equity, you might dodge this prejudice by making a bigger-than-necessary down payment. And it might improve the chances of your VA loan offer being accepted.

4. Waive contingencies

Your seller will almost always find your VA loan offer more attractive if you are able to waive some or all contingencies. And that might be enough to overcome any prejudice against VA loans.

Contingencies are usually written into purchase offers. They list the events that must be fulfilled in order for the deal to proceed. And they’re an important safety net. Because, if you back out of a home purchase on grounds that aren’t covered by a contingency, you’re likely to lose your earnest money deposit.

So don’t waive contingencies unless you’re certain you can proceed with your purchase no matter what. And talk it through with your buyer’s agent before you sign anything.

5. Wait for the market to cool

Any prejudice over VA loans is only magnified by the current hot real estate market. Sellers are typically getting multiple offers, often above the asking price, and have the luxury of picking and choosing. If they’ve only an inkling of doubt about one, they move on to another.

But the market’s bound to cool at some point. And, faced only with your VA loan offer, a seller will be much more likely to take it seriously.

We’re not suggesting you wait. Both home prices and mortgage rates may well have risen by the time the market cools that much. And, by then, you may be priced out of the sort of home you can currently afford.

So our best advice would be to persevere and take each failed offer on the chin. But, if you’re in a good position to wait and don’t mind doing so, you might have better luck with your VA loan offer.

6. Use a different loan program

Some buyers with VA loans are so frustrated by repeated failed purchase offers that they consider switching to a different sort of mortgage. But don’t bank on that solving the problem.

At the time this was written, people with all sorts of mortgages were having to write many offers, simply because competition among homebuyers was so great. And even cash buyers with zero contingencies were sometimes missing out on deals.

However, if your frustration is turning into desperation, trying another type of mortgage is a possibility.

You’ll likely need a 3% down payment and a credit score of 620. But then you could get a conventional mortgage from Fannie Mae or Freddie Mac.

However, your mortgage rate would likely be higher than with a VA loan. And only those with VA loans or 20% down payments escape continuing mortgage insurance premiums. So your monthly payments will likely be significantly higher without a VA loan.

Of course, you can quickly refinance your Fannie or Freddie loan into a VA one. But then you’ll be paying closing costs on two transactions rather than one. And with those averaging 2- 5% of the home’s value, you’re probably looking at several thousand dollars. So, this is a last-resort option only for the truly desperate.

Common VA loan myths, busted

If you want to understand why a seller rejected your VA loan offer, and hopefully prevent another rejection, it helps to understand why sellers and agents might be prejudiced against these loans.

Here are four common myths about VA loans in today’s market — and why they’re not true. Armed with this knowledge, you might have a better chance at getting your next VA loan offer accepted.

Myth 1: VA loans are less likely to close than other types of mortgages

One myth about VA loans is that they’re harder to close than other mortgage types. This could be scary for sellers who are worried about the sale falling through if the borrower can’t get funding.

In reality, though, VA loans close at nearly the same rate as conventional loans — and at a slightly better rate than FHA mortgages.

According to July 2021 data from ICE Mortgage Technology (the most recent at the time of writing):

  • About 79% of all home purchase loans close
  • 77.7% of VA purchase loans close
  • 79.4% of conventional loans close
  • 76.6% of FHA loans close

So there’s always a small risk of a mortgage being denied at the last minute. But that risk is not significantly higher for VA loans than for other types of home loans.

Myth 2: VA loans take ages to reach closing

The same report measures the average number days it takes to close a mortgage. According to the data, it does sometimes take slightly longer for VA loans to close. But the emphasis is on the “slightly.”

From January-July 2021, the average times to close a home purchase loan were as follows:

  • VA loan — 55 days
  • Conventional loan — 49 days
  • FHA loan — 55 days

So it only takes about 6 days longer, on average, to close a VA loan than a conventional mortgage. And if you’re making a competitive offer on a home — especially if it’s the best offer on the table — those 6 days shouldn’t be a huge concern for most sellers.

Myth 3: VA loan appraisals are slow and undervalue homes

Appraisers have exactly the same goal no matter what type of loan is involved: to establish a fair market value for the home. And it’s their professional duty to do precisely that. Anyone who routinely undervalues properties is wrong and shouldn’t expect enduring job security. Again, the type of mortgage involved is immaterial.

As for VA appraisals taking longer, there may be a grain of truth in that.

Veterans United says, “The appraiser compiles the comparable sale and property condition information into a report that’s uploaded to the VA’s secure web portal within 10 business days on average, although it can be more or less depending on where the home is located and other factors.”

But there is an extra step with VA loans. Because appraisers’ reports must be reviewed by either a specialist employed by the lender or the VA itself.

That’s generally a good thing. Because rogue appraisers should be exposed quickly and rogue appraisals should be corrected.

Does it add more time? Maybe. But the “days to close” data in the previous section clearly shows appraisals aren’t holding things up much.

Myth 4: VA loans require sellers to cover all the buyer’s closing costs

Borrowers with VA loans have no more power to make a seller pay their closing costs than any other homebuyer.

In a buyers’ market, purchasers routinely include closing costs within their negotiations. But such buyers’ markets are rare at the moment. So few homebuyers can persuade sellers to pay some or all of those costs. And that goes for VA loan offers, too.

It’s true that certain closing costs cannot be paid by a VA loan borrower. But the lender usually absorbs those.

Of course, in some states, it’s traditional for sellers to cover buyers’ closing costs. So this is a nonissue in those places.

Still, this myth is proving persistent. One loan officer wrote to HousingWire in August 2021 to say, “I STILL to this day get phone calls from listing agents asking whether their seller is obligated to pay closing costs. So there is still a HUGE misconception out there.

They continued, “I try to educate my Realtors as often as possible about this, but I think this is one of the reasons veterans so often get passed up in the process. The agents or sellers who don’t bother to call I’m sure end up passing up the veteran.”

This underscores the importance of choosing a buyer’s agent who is also a VA loan expert.

If your agent can dispel some of these myths at the time they submit your offer, you might have a much better shot at winning the home you want.

Verify your VA loan eligibility. Start here (Oct 17th, 2021)

VA home buying FAQ

Can a seller discriminate against a VA loan? 

In short, yes. There are plenty of laws that ban discrimination in housing on many grounds. But none of them covers mortgage types. So a seller might choose an offer with another mortgage type, like a conventional loan, over a VA loan if they wish.

Are VA loans more difficult for sellers? 

Not really. They used to be more difficult in the past, but the VA has eased up on many rules that made things tougher for sellers. Now, the idea that VA loans take a lot longer to close or are more expensive for the seller is only a myth.

Does it take a VA loan longer to close? 

On average, it takes VA loans a little longer to close than conventional loans — but only by about 5 or 6 days. And the process will move faster for some VA buyers.

Do VA loans cost more for sellers? 

Absolutely not. Sellers do not pay any of the buyer’s mortgage costs unless they CHOOSE to help cover closing costs.

Do sellers pay closing costs on a VA loan? 

Not by default. A seller would only pay the buyer’s closing costs if they agree to do so — and that usually only happens in a buyer’s market (for instance, if the seller is having trouble moving the house and needs to add an extra incentive). In today’s strong seller’s market, it’s very unlikely a seller would end up paying the buyer’s closing costs.

What do sellers have to pay for on a VA loan? 

Nothing. A few VA loan closing costs cannot be charged to the buyer. But nowadays lenders typically pick up that tab.

Do VA appraisers lowball?

They certainly shouldn’t. It’s the job of all appraisers to determine the fair market value of a home — regardless of the mortgage involved. And we’ve seen no evidence that those appraising homes for VA loans deviate from that.

Are VA loans harder to close? 

Not really. There are only a few percentage points difference between the failure rates of all the different types of mortgage applications. And VA loans are usually somewhere in the middle.

How strict is a VA home inspection?

There’s no specific VA home inspection. However, the VA appraisal is a little more strict. Appraisers have a longer checklist of minimum property requirements (MPRs) for VA loans than for some other types of mortgages. Those requirements protect VA borrowers from buying a home that’s not safe, sanitary, or structurally sound. And they’re rarely an issue for those buying modern, mainstream homes in good repair.

What should I do if a seller rejects my VA loan?

By the time the seller rejects your VA loan offer, it may be too late to do much. Chances are, another offer’s already been accepted. Above, we list a few ways of improving your chances of your offer getting a fair hearing. They start with getting a buyer’s agent who knows all about VA loans and a lender that’s readily accessible to listing agents.

The bottom line

It’s an unfortunate reality that some sellers are biased against VA loans. But there’s no reason for them to be.

The best thing you can do to get your VA offer accepted in this situation is work with a real estate agent and lender who have a deep knowledge of VA loans and can help push your offer through to closing

And keep trying. The housing market is tough for everyone right now, and it will likely take multiple tries to get your offer accepted — VA loan or not. So keep your head up and stick with it to land your dream home!

Verify your new rate (Oct 17th, 2021)