Veterans are finding it difficult to buy houses with VA loans in Fresno’s hot housing market, a reflection of what’s happening all over the nation.

In addition to competition from cash offers and conventional loans, veterans face hurdles created by misconceptions about VA loans.

However, there is a path to success for veterans hoping to buy a home. Real estate experts advise them to find an agent with experience representing veterans.

Fresno Veteran’s Long Battle for a Home

Linda Cater, who served in the U.S. Marine Corps 21 years ago, has been battling to find a home in Fresno since early January.

Cater began to browse for houses that were on the market but said the agents she first worked with weren’t very helpful. Then she teamed up with Beverly Grabel, a broker associate for Vylla Home Inc.

Grabel, who served in the army, works to help veterans buy homes. She helped Cater bid on a house by contacting the seller and negotiating closing costs, a significant win in this highly competitive market.

Cater had never used her VA loan or owned a home before, but decided that with her mom and her oldest moving back home, they needed more room.

She moved to Fresno eight years ago with her two youngest children after going through a hardship and becoming homeless. With the help of HomeFront, a 20-bed home based in Fresno that helps house homeless female military veterans and their children, she got back on her feet. She has worked for the organization for over five years now.

Uncertainty Over When Home Will Be Move-In Ready

To Cater, it felt like she didn’t have much of a chance in buying a home after submitting several unsuccessful offers. Finding a home at a price she could afford — $240,000 — was a frustrating challenge.

Now that she has successfully found a house, she is having difficulty closing after tenants continue to live in her soon to be home.

With her future home sitting in escrow for more than 90 days, Cater now has found herself having to pay a penalty fee for the closing costs until the current tenants move out.

She was anticipating moving in soon and has been flexible through the entire process. However,  with the eviction moratorium extended until Sept. 30, she doesn’t know when she will be able to close on the house.

“At this point, I don’t know anymore, but looking at the market, I don’t have a choice,” said Cater. “It’s still going to be cheaper in the long run than if it was any other house — I’m going to wait a few more weeks.”

VA Loans Most Beneficial but Often Overlooked

For current and former military service members like Cater, a VA-guaranteed loan is the least expensive of the three most popular loan programs. It features low interest rates, no private mortgage insurance requirement, and no down payment.

However, in a seller’s market, VA and FHA loans don’t stand much of a chance, says Grabel. Despite the odds, new VA data by Veterans United shows VA purchase loans for Generation Z veterans — generally aged 18 to 24 — were up 123% year over year. Millennials seeking VA purchase loans were up 16% on the year.

VA loans are often picked last in comparison to other loan programs, and part of the reason stems from the misconceptions that many agents have about them.

“The common misconception is VA loans take forever, and that they’re going to fall out and that there’s going to be appraisal issues, and that’s just not true anymore,” Caitlin Turkovich, a Las Vegas-based branch manager for Union Home Mortgage, told CNBC.

Which Loan Programs are the Most Successful?

Dave Kidder, a broker associate for Keller Williams Fresno Realty, says that in a normal year, 10% to 15% of VA loans and 50% to 60% of FHA loans are accepted. Right now, he said, less than 5% of both loans are being accepted.

“FHA and VA, unfortunately, have not always been able to compete with conventional loans and cash,” said Kidder. “It breaks my heart when I hear of a situation where the only criteria is that they just didn’t have the money and that’s why they didn’t accept it or they were afraid of the appraisal and both of those are stereotypes in the marketplace that are not necessarily true.”

Recent data by the National Delinquency Survey shows that VA loans had the lowest foreclosure rates in the U.S.

Following the COVID-19 pandemic, a report by Mortgage Bankers Association shows delinquency rates for all mortgage loans rose at the end of 2020 with FHA loans rising to a record-high 15.7 % at the end of last year.

As for the month of August, total delinquency rates have started to decline, but FHA delinquency rates remain higher than any other mortgage loan.

Real Estate Agents Lack Understanding of VA Loans 

Non-profit organizations like Veterans Association of Real Estate Professionals (VAREP), focuses on helping veterans acquire a home, but also work to help educate real estate professionals on what a VA loan is and how it works.

Bob Voss, board member for the Fresno chapter for VAREP, says that a lot of times, agents know more about other loans than they do VA loans.

“If you’re putting an offer in on a house and there’s an agent that’s going to represent the seller, he’s going to present the offers to the seller and then also be able to tell them, OK, this is a cash offer, this is a conventional, this is an FHA, and this is a VA,” said Voss. “If the seller starts asking the real estate agent about the different loan types again, they’re going to have that stigmatism, most likely that the VA loan is going to take longer to get done and it’s going to be harder to get through.”

What Can Veterans Do If They Want to Own a Home?

It’s all a matter of being proactive, says Grabel. She seeks possible sellers that might be thinking of selling their homes before they are even on the market and constantly reaches out to other agents and sellers with well-crafted offer letters.

“The best thing veterans can do right now is educate themselves on the different loans that are out there and be careful of the real estate agents that they pick to help them buy a house,” said Grabel. “Because if they are not knowledgeable of how to get their offer presented, then they are going to have a hard time getting the offer accepted.”

Fresno’s Housing Market Still Struggling to Meet Demand

Kidder says the Fresno market has seen a significant drop in available housing.

Before last March, there were over 2,200 homes on the market as opposed to the 650 homes available today.

In a given year, there are about 9,500 homes sold across Fresno, Madera, and Kern County and although agents still sold about the same amount of houses, they had many fewer houses to market — leading to soaring prices.