Rising costs and confusing fee structures are just some of the unexpected hurdles veterans face on the path to homeownership
Recent regulatory changes and outdated VA loan policies are making it increasingly difficult for veterans to buy homes. The National Association of Realtors’ (NAR) antitrust lawsuit reshaped agent commission structures, which directly impacts VA borrowers.
As of Aug. 17, 2024, sellers are no longer allowed to advertise offers of compensation to buyer agents on Multiple Listing Services (MLS). This change shifts the burden onto buyers, who may now need to negotiate and cover their agent’s commission directly.
For veterans using VA loans, the change introduced significant challenges. Previously, VA rules prohibited buyers from paying certain fees, including agent commissions, to shield veterans from added costs. In response to the settlement, the US Department of Veterans Affairs updated its policies on Aug. 10, 2024, now allowing veterans to pay buyer-broker fees.
“Previously, veterans were prohibited from covering the costs of real estate agent representation. However, following the NAR lawsuit, the VA acted swiftly to prevent any disruption in the veteran homebuying market,” mortgage expert Cathy Jordan (pictured) said. “Consequently, it is now accepted that the buyer's agent's compensation does not have to come solely from the seller, allowing veterans to pay this once ‘non-allowable’ fee.”
The VA moved quickly to adjust its policies, but the shift changes left many veterans struggling to afford agent representation.
“There were concerns that veterans would face difficulties affording buyer agent representation. Given the increasing cost of homeownership, adding the prospect of real estate agent fees left many in the industry wondering how the outcome of the lawsuit would negatively impact veterans,” Jordan said.
Another obstacle is the VA’s outdated fee structure. The result? Veterans are often pushed into higher-cost loans.
“The VA has a long-standing rule that states a veteran cannot pay more than a total of 1% of ‘allowable’ fees. Those allowable fees can add up quickly especially if you are in a high-cost location; state, city or county. Often this 1% rule does not cover all the allowable charges, and the lender must switch the compensation type to cover all the fees and costs associated with the VA loan,” Jordan said.
“The compensation change pushes the loan into a higher interest rate. This means the veteran is paying a higher mortgage payment. In my opinion, the VA should review how rising costs have impacted the 1% rule and make adjustments.”
In addition to policy challenges, misinformation about VA loans continues to prevent veterans from fully utilizing their benefits.
“There are still misconceptions and misinformation about VA loans for various reasons. Many agents have outdated views about the appraisal process, some don’t have experience with the nuances of VA loans, and some agents don’t consider the impact of advising veteran homebuyers to choose other loan options other than VA,” she said. “A lot of agents have misconceptions about VA loans because they don’t understand them, then they don’t take the time to want to understand them.”
These misconceptions, she argued, often come at the expense of veterans.
“I have personally spoken to veterans who are purchasing their second property and the home they are selling was not financed using their VA eligibility. When I ask why, the common answer is ‘My agent told me I should buy the house using FHA or other loan program,’” Jordan said. “There is no consideration for the unnecessary costs to the veteran like a down payment requirement, mortgage insurance, and other unnecessary fees.”
One of the most persistent myths is that veterans don’t need any money to secure a VA loan. This goes hand in hand with another common belief that VA loans require perfect credit.
“I hear this all the time; when I ask a prospective veteran homebuyer how much money they have saved to purchase a home, the response is usually: ‘I’m a veteran, I don’t have to pay anything.’ This is definitely a misconception for veteran homeowners,” she said. “The other misconception that keeps veteran buyers from pursuing buying a home is credit. VA guidelines do not have a written minimum credit score requirement. The VA is focused on credit history more than credit scores. If a lender says you need a certain credit score, that is the lender’s requirement, not the VA.”
Veterans also face challenges in competitive housing markets, where VA loan offers are often viewed with skepticism by sellers and agents who don’t fully understand the appraisal process or lending requirements.
“If a veteran buyer who has chosen to use their VA eligibility to purchase a home is in competition with a buyer who using other (non-cash) financing options, from my perspective, it has been extremely difficult for the VA financing option to be chosen over other loan options. In other words, I feel in a multi-offer situation, the VA loan is not a consideration if other buyers are not using VA,” Jordan said.
Her advice to veterans navigating the homebuying process?
“My advice is to be patient. Real estate and real estate financing are ever-changing. The other piece of advice would be to interview several real estate agents and potential lenders,” Jordan said. “Ask what percentage of their clients are veterans and how often they are involved in the VA buying or lending process.”
For Jordan, who started her mortgage career while still in the military, fighting for veterans in the housing market is more than just business—it’s a mission.
“I am very proud of our decision to focus on the veteran community. Our veterans and their families have sacrificed a lot for our country, and they deserve help from people who really care,” she said. “I am proud of my team and what we do. Sometimes I feel like I am in a constant fight with people in the real estate industry. As a veteran, I will continue to advocate and educate to help the veteran community; a community I am proud to be part of. “
