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When VA /FHA Clearly Stronger Than Conventional? Large Down

We often have buyers willing to take VA or FHA financing even though they have substantial funds for down payments. The reason is that they are often bidding on properties that will be difficult to appraise because of the lack of closed comparable sales (necessary to “bracket” the purchase price). Sellers often want appraisal contingencies waived before they will even accept an offer in many markets.

Because VA and FHA allow for 100% and 96.5% financing, respectively, an appraisal can come in very low and the terms of the financing will change very little.

If a VA buyer, for example, offers $600,000 for a property that can only be appraised for $520,000 but he was willing to put down 20% in the first place, the low appraisal will have no effect on his financing. The situation is similar for FHA buyers of course.

Taking advantage of high Loan-to-Value VA and FHA financing is often the only way to make transactions work in this exceptionally hot market. High LTV financing allows borrowers with extra cash to make up the shortfall between the maximum LTV financing and the seller’s desired price when appraisals come in low.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646