Bidders using FHA loans and VA loans often find their offers rejected by sellers and listing agents weighing multiple offers. No official statistic tracks denials for buyers financing with FHA loans and VA loans, but real estate professionals say the reality is clear: Sellers place the highest value on cash offers, followed by bids financed with 20 percent down payments and loans that fit the guidelines of Fannie Mae and Freddie Mac. In bidding wars, FHA and VA buyers can be shunted to the back of the pack.
“It’s hard to quantify it, but everybody who works on the street feels and and sees it,” says Brian Floyd, a loan officer at Fairway Independent Mortgage in Concord, North Carolina. “The market is hypercompetitive. When it’s hypercompetitive, you’re stacking up multiple deals. A lot of sellers are trying to simplify that exhaustive amount of information that’s in front of them. How in the world are you supposed to analyze 50 offers?”
For sellers overwhelmed with bids, the analysis often means simply eliminating bids backed by VA or FHA loans. With their low down payment requirements and looser rules around credit scores, the conventional wisdom goes, VA or FHA loans pose more risk.
