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Discrimination against veterans with va loans

How to Battle Discrimination Against Veterans and VA Loans

Why Some Sellers Don’t Like VA Loans

There is a very disturbing and ugly pattern of discrimination against Veterans trying to qualify for their VA Home Loan Entitlement that happens in the real estate industry and that must change.

Veterans that qualify for VA home loan benefits are having difficulty getting offers accepted to buy a home.

The reason they are not being considered?  Because they are using VA financing.

Why Some Realtors Don’t Like VA Loans?

Some realtors and sellers don’t like VA loans because they’re misinformed, believing things about VA loans that literally haven’t been true for years.

Guidelines change all the time in our industry, and the VA home loan is no exception.  There was a time when the VA home loan had certain restrictions that would not allow the Veteran to pay certain closing costs associated with the purchase of a home.

The burden of these costs typically fell on the seller. It is understandable that this could cause some reluctance on both the seller and the agent’s part to accept these offers.  I guess what makes me most upset is that these guidelines have been changed for years.

While there are still costs that the Veteran is not allowed to pay, lenders have the ability to cover all of these closing costs through the loan.  By taking a slightly higher interest rate (and I mean slight!), we are able to pay all costs for any Veteran trying to buy or refinance a home.  Problem solved.

My greatest frustration comes from the fact that real estate agents do not even bother to learn about the VA home loan, and how it directly benefits our military personnel.  It is almost impossible to show gratitude equivalent to the sacrifices that our military men and women make to keep us safe.  The VA home loan benefit is one small way to try to get close.

Myths About VA Loans

The most common myths about VA loans include:

  • The seller is required to cover all the buyer’s loan closing cost
  • VA loans are less likely to close than other loans
  • VA loans take way longer to close than other loans
  • VA appraisers take significantly longer than other appraisals
  • VA appraisers are more likely to undervalue homes than other appraisers

All of these are myths and are not true. I could show you a bunch of data and facts that prove that, but I don’t want to waste your time.

Speak to a Mortgage Professional with VA Expertise

Who is Affected by This Discrimination?

The VA home loan benefit offers far more flexible qualifying guidelines than other mortgages, including higher loan limits, shorter waiting periods after a financial hardship, and best of all – NO DOWN PAYMENT!

Why do Veterans Have to Fight so Hard for Homeownership?

CLICK HERE to watch VA loan specialists Josh Lewis, Scott Valins & Jason Sharon discuss and dispel myths around your VA Home Loan Benefit!

Requirements for VA Loans

Wartime Eligibility – Veteran service during wartime periods:

  • WWII: 9/16/1940 to 7/25/1947
  • Korean: 6/27/1950 to 1/31/1955
  • Vietnam: 8/5/1964 to 5/7/1975

You must have at least 90 days on active duty and been discharged under other than dishonorable conditions.  If you served less than 90 days, you may be eligible if discharged for a service-connected disability.

Peacetime Eligibility – Veteran service during peacetime periods:

  • 7/26/1947 to 6/26/1950
  • 2/1/1955 to 8/4/1964
  • 5/8/1975 to 9/7/1980 (Enlisted)
  • 5/8/1975 to 10/16/1981 (Officer)

You must have served at least 181 days of continuous active duty and been discharged under other than dishonorable conditions.  If you served less than 181 days, you may be eligible if discharged for a service-connected disability.

Speak to a Mortgage Professional with VA Expertise

Service after 9/7/1980 (enlisted) or 10/16/1981 (officer)

If you were separated from service which began after these dates, you must have the following to qualify for VA Loans :

  • Completed 24 months of continuous active duty or the full period (at least 181 days) for which you were ordered or called to active duty and been discharged under conditions other than dishonorable, or
  • Completed at least 181 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1171 (Early Out), or have been determined to have a compensable service-connected disability;
  • Been discharged with less than 181 days of service for a service-connected disability.  Individuals may also be eligible if they were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances for the convenience of the Government.

Gulf War – Service during period 8/2/1990 to date yet to be determined

If you served on active duty during the Gulf War, you must have:

  • Completed 24 months of continuous active duty or the full period (at least 90 days) for which you were called or ordered to active duty, and been discharged under conditions other than dishonorable, or
  • Completed at least 90 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1173 (Early Out), or have been determined to have a compensable service-connected disability, or
  • Been discharged with less than 90 days of service for a service-connected disability.  Individuals may also be eligible if they were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances, for the convenience of the Government.

Active Duty Service Personnel 

If you are now on regular duty (not active duty for training), you are eligible after having served 181 days (90 days during the Gulf War) unless discharged or separated from a previous qualifying period of active duty service.

Selected Reservists or National Guard

If you are not otherwise eligible and you have completed a total of 6 years in the Selected Reserves or National Guard (member of an active unit, attended required weekend drills and 2-week active duty for training) and

  • Were discharged with an honorable discharge, or
  • Were placed on the retired list, or
  • Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable service, or
  • Continue to serve in the Selected Reserves

Individuals who completed less than 6 years may be eligible if discharged for a service-connected disability.

Un-Remarried Surviving Spouses and Spouses of POW or MIA

  • Are an un-remarried spouse of a Veteran who died while in service or from a service-connected disability, or
  • Are a spouse of a serviceperson missing in action or a prisoner of war

Note:  Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit.  However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility.  VA must deny applications from surviving spouses who remarried before December 6, 2003, that are received after December 15, 2004.

Speak to a Mortgage Professional with VA Expertise

Eligibility may also be established for:

  • Certain United States citizens who served in the armed forces of a government allied with the United States in WW II.
  • Individuals with service as members in certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with WW II service, and others.

Frequently Asked Questions About VA Loan Discrimination

Can a seller refuse a VA loan?

Unfortunately, yes they can. While there are many laws that prevent many different types of discrimination, none of them cover the source of the mortgage. So a seller does have the right to choose an offer from someone who will use a conventional or another type of loan over someone who will use a VA loan. 

Are there any extra VA loan requirements for sellers?

The VA has established a set of requirements that a home must meet to qualify for a VA loan. These are called Minimum Property Requirements (MPRs) and can be summarized in the phrase, “a home must be safe, sound, and sanitary.” As part of the VA loan appraisal process, the appraiser must indicate that the home meets a set of basic requirements, including:

  • Mechanical systems (electrical and plumbing systems) are safe to operate and have life remaining
  • There are no signs of leaks in basements and crawl spaces
  • There are no signs of termites, fungus growth, or dry rot
  • The heating systems are adequate
  • Water, hot water, and sewage systems meet local health department standards
  • The roofing is adequate and has a future life
  • There is no lead-based paint. If it existed in the past, it must be remediated

There are more, but this gives you an idea.

For most sellers, this won’t be a problem, because they are selling a fully-functional home that meets health and local codes.

What are the VA rules for Realtor commissions?

Realtors can receive full commissions on homes purchased with a VA loan. The only catch for the real estate agent or broker is that none of those commissions can be paid by the buyer. Realtor commissions on VA loan sales are fully the responsibility of the seller.

Speak to a Mortgage Professional with VA Expertise

I live in a market with lots of active military and veterans. Is it a good idea to use a Realtor who specializes in VA loan sales?

While it’s never a bad idea to work with a specialist, the difference between VA loans and other types of loans is small, so most real estate agents working in this type of market should be aware of those conditions. The one question to ask your selling agent is “what’s your attitude about working with VA loans?” If they give you a negative answer, you may want to look for a different agent who has a better understanding of VA loans.

Why don’t real estate agents like VA loans?

Some real estate agents don’t like VA loans because of three reasons.

  1. They believe certain myths about VA loans that are untrue (longer closing times, lower closing rate, VA loans won’t cover closing costs, etc.)
  2. They think that VA loans mean lower commissions to them. They don’t – the commissions are the same, they just have to be paid by the seller, not the buyer
  3. The house they are selling has issues they know won’t pass a VA loan appraisal, so they dissuade the seller from accepting those offers, knowing they will have to fix those issues in order to close the sale

What closing costs are VA buyers not allowed to pay?

VA loan buyers are not allowed to pay:

  • Real estate broker or agent commission fees
  • Lender attorney fees 
  • Fees for appraisals requested by anyone other than the seller or veteran
  • Fees for appraisals required for a Reconsideration of Value
  • Fees for a flood zone determination

These are costs that a VA buyer cannot pay. The only item on that list that must be covered by the seller is broker/agent commission fees. Lenders traditionally absorb the other fees for VA loan buyers.

Does a VA loan cover closing costs?

The VA allows lenders to charge a 1% fee to cover their closing costs. (On a $250,000 loan, that 1% comes to $2,500.) If they charge that 1% fee, the lender is not allowed to charge the buyer many of the traditional loan closing costs, including:

  • Interest rate lock-in fees
  • Loan application or processing fees
  • Lender appraisals
  • Escrow or notary fees
  • Document preparation fees
  • Loan closing or settlement fees
  • Tax service fees
  • And many more

If the lender chooses not to charge the 1% fee, they can charge fees for the items listed above, but the total of those items cannot exceed 1% of the loan value.

Speak to a Mortgage Professional with VA Expertise

In short, as a buyer, you can expect to pay no more than 1% of your loan value towards closing costs.

What is the VA amendatory clause?

The VA amendatory clause, also known as the VA escape clause, states that the VA loan buyer has the right to cancel their offer (give up on the house and remove themselves from the purchase contract) at no fee if the home appraises for an amount lower than they have agreed to pay. 

Be aware that though this clause says they have the right to back out of a deal because of a low appraisal value, they are not required to do so. They can choose to waive the clause, and pay the difference between the purchase price and the appraised value out of their own pocket and proceed with the deal. The only requirement is for both the buyer and the seller to sign the clause, they’re not required to live up to it.

Specifically, the clause states:  “It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise or be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs. (Authority: 38 U.S.C. 501, 3703(c)(1))”

What’s the Solution?

Education is the solution.  If you are eligible for VA home loan benefits, make sure that your real estate agent is familiar with the guidelines of VA financing and willing to fight for you.  Battling the ignorance of uneducated real estate professionals, and sellers are something we have to do one person at a time.

If you are having a hard time getting your offer accepted, it may be VA discrimination, and you may need to find a better home buying team to fight for you.

Have Questions About Your VA Home Loan Benefit Or Other Mortgage Issues?

We can help! You can Ask Your Question here and we will connect you with a Mortgage Expert in your area that can help, or you can find a Mortgage Expert Near You below this article.

About the Author

Scott Schang

A 20+ year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues and making sense of complicated real estate and mortgage topics on this website since 2007

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  • Randy says:

    I can’t believe this discrimination is happening. I found your page because I just had a very aggressive offer on a home rejected – because I’m using a VA loan. The selling agent indicated that the seller accepted a similar offer, but not mine because it was VA financing. My agent indicated that time to time they see this. I decided to ask around for more information and found that it is a known issue among agents – some sellers agents advise their clients not to accept VA loans – that the VA makes the selling process more difficult – which I understand to be false.

    Veteran’s need to take a stand and make this problem known. I want to help raise this awareness and push for a solution for veterans that are experiencing this discrimination.

    • Scott Schang says:

      Randy, I can’t believe that so many real estate agents still think that VA loans are more difficult to close and are willing to discriminate against a Veteran. This sickens me to this day, and we cannot stop shouting from the rooftops that this is happening.

      If there is a local newspaper, podcaster, radio station or tv station in your community – I would reach out to them and see if they’re interested in the story! Especially if you can get an agent to admit that they’ve seen this happen. It’s a human interest story, and it’s a tragedy.

      I have a very good friend / Veteran who is also in the mortgage industry that created a training program to teach real estate (and mortgage) professionals how to serve the veteran community by understanding the VA home loan benefit that you’ve earned.

      He has a private facebook group with over 52,000 Veterans and professionals that are all focused on serving Veterans in this way.

      Here’s the link to the community – https://www.facebook.com/groups/2408847442670537

      Let them know you know me if they ask where you heard about the group from.

      As I mentioned in the article, a LOT of this falls on your agent’s shoulders. They cannot let a listing agent make decisions out of ignorance. They should be fighting for you and not taking no for an answer.

      I hope this helps, and THANK YOU for your Service!


  • Mark Baird says:

    Hi Scott, I am from So. California. I am a fully benefited veteran. I was discriminated against several times by the same home builder, their mortgage company and several employees. I filed a DFEH claim and it was accepted, I am having a hard time finding an attorney that knows about veterans benefits. The company does not want to go to mediation.

    • Scott Schang says:

      Hi Mark, I do not know about any attorneys, but what I’m more curious about is “how or why” they discriminated against you. Were you ever able to qualify for a VA home loan?

      That’s where I would start. I would like to introduce you to a VA loan expert that I know and trust (he’s my business partner!) and have him look at your loan file.

      There are a lot of lenders that put restrictions above and beyond the standard underwriting guidelines, and that’s not illegal, it’s just dumb. On their end, they are trying to reduce the risk of default. The problem is that they don’t always tell you that someone else might be able to help!

      If you’re ok letting me introduce you to Josh, shoot me an email at scott@findmywayhome.com. I’ll connect you with Josh and let’s start there.

      THANK YOU for your Service! I hope this helps?


    Virtually impossible to get VA financing for condos in Ft. Lauderdale/Palm Beach Florida area

    • Scott Schang says:

      Marvin, I have a mortgage expert friend of mine that specializes in condo financing in this area of Florida. If you’re calling a call center lender or someone off the internet, it’s unlikely they will know what steps need to be taken and will just say no.

      Please send me an email to scott@findmywayhome.com and I will make an introduction to someone I know that I think can help.

      Hope this helps?

  • Disappointed Vet says:

    The Solution is not a solution.
    I have read many articles highlighting the discrimination against VA loans and none of them explains in detail why.
    The VA is offering benefits to veterans by making laws that private real estate firms and lenders must obey when processing a transaction involving a VA loan.
    Some of the Non-Allowable fees that are prohibited: Real estate broker or agent commissions or fees

    Real Estate Brokers and Agents are scam artists and are corrupt, they do not work for the buyer, nor for the seller, and they try to suck the blood out of both the buyer and the seller to make six figures profit.

    Here’s what the broker and agents do: in a real estate transaction, they first make sure to isolate the buyer from the seller, and ensure to cut all possible communication between the two in order to secure their dirty games.

    The paperwork they provide to the seller is not the same paperwork they provide to the buyer, but they make it look like it is the same.

    They charge the seller outrageous fees and make them think that the buyer is not paying for those fees.

    They charge the Buyer outrageous fees and make them think that the seller is not paying for those fees.

    They ask the buyer to pay additional money to help the seller with his closing costs (that money will go straight to the Title company and Broker’s pockets, and not to the seller)

    They’ll ask the seller to pay additional money to help the buyer with his closing costs (that money will go straight to the Title company and Broker’s pockets, and not to the seller)

    They’ll charge the seller the full commission of 6% (3% + 3%)

    They’ll tell the buyer that the seller refused to pay the buyer’s agent commission and charge the buyer an additional 3% commission.

    This scam can be noted in the contract that the buyer signs, which states that:
    -Brokers will first try to collect the 3% commission fee from the seller, and if the seller refuses to pay then the buyer is responsible for the 3% commission fee (Read your contract and refuse to sign off on such condition).

    And if all that money is not enough for these Rip-off Brokers/Agents/Title Companies, here’s some more ways they make money off of the Seller and the buyer:

    Most Real Estate firms own or have commission based partnership with inspection, insurance, and appraisal companies, and even Banks, and try to make extra money from those services, and even double dip by charging the Seller for a service, and turn around and charge the buyer for the same service.

    After looking at all these creative ways, the Real Estate Broker have at his disposal, and knowing that VA loans prohibit Brokers from collecting commissions or fees from the Buyer, it is evident that VA loans are not a choice, and it is a type of loan that they will always, 100% of the times, reject as long as the market is a seller’s market.

    The only time Real estate brokers accept an offer with a VA loan, is when there is hardly any other offer.

    The Solution my friends is in the hands of the Government. They need to do a better job at regulating this chaotic business, a business that turns real estate brokers into billionaires overnight, without sweating for their money. The problem with this solution is that the politicians are often the owners of big real estate firms, and they set up the regulations to their advantage, and turn a blind eye on the different loop holes that they use to their advantage.

    The bottom line is that The VA Loan Benefit is not a Benefit, it is a tool to brainwash veterans.

    • Scott Schang says:

      Thank you for sharing your disappointment and frustrations about getting offers accepted. I appreciate your experience, but I can tell you that by far malicious intent is NOT what is preventing Veteran offers from being accepted. Ignorance is by far the most common reason for a Veteran’s offer not being accepted.

      Is your Realtor a Veteran? Is your mortgage lender a Veteran? You shouldn’t have a have Veteran fighting for you, but in my experience, this is still the best strategy to give you the best chance to educate the seller and the seller’s agent.

      THANK YOU For your Service! Hopefully, if we have this conversation often enough, we can make real changes to how Veterans are treated in a seller’s market.

  • Wendy says:

    I am a realtor in Tennessee and work mainly with buyers. I usually work with multiple VA buyers every year. I currently have a veteran I am working with and they cannot get an offer accepted. Just yesterday the listing agent told me their offer was not accepted because they had multiple offers and would prefer a conventional financing offer. My buyers offered high enough to cover their closing costs and still be above asking price. I feel as though sellers do not want to accept the VA offers because they are afraid they will have to do too many repairs (this is also the case with FHA offers) even if the home is in good condition. I just had another much higher priced one close and the VA appraiser required an outbuilding to be repainted. This could be cost prohibitive for certain sellers. What can I do to help my buyer’s get a home that they love?

    • Scott Schang says:

      Wendy, thank you for this story. Unfortunately, this experience is not limited to Veterans, but most certainly is exaggerated due to the greater requirements of a VA appraisal. It seems that the best option for buyers today is to be prepared to either make many, many offers, or be prepared to pay cash for the difference in a market where every single offer is above asking price….by a lot!

      There is no good answer.. One option might be to convert the loan to conventional for the purchase, then refinance into their VA home loan benefit once they own the property.

      Another option is much more complicated, but it could work. When you do a search for a list of properties you buyer might want to buy, look up title records for those properties, find out who the owner is, and do a linkedin, facebook search for the buyer in an attempt to find a Veteran owner.

      Maybe if you can identify an owner that is a Veteran, you may find more empathy for your buyer’s situation. I did a podcast with a mortgage broker in GA that is doing someting very similar to this strategy and having great success. Here’s the episode – https://youtu.be/cPYamQ9l5sc

      Maybe it will give you some ideas? Hope this helps?

  • Napua K says:

    It is definitely frustrating. Been trying to help my mom find a home in which she is a surviving spouse of a 100% disabled vet so she gets the VA home loan benefit but seller’s aren’t even looking at our offers anymore soon as they find out it is a VA loan they dismiss it.

    • Scott Schang says:

      I’m so sorry to hear this, it really breaks my heart. Especially in your Mom’s situation. Is your real estate agent a Veteran? I’ve found that working with a Realtor that is a Veteran, they often have a much easier time talking to the listing agent and taking the risk of 100% financing off the table.

      Many Realtors believe that the seller has to pay extra to sell to a Veteran, that is not the case. There are certain costs that the Veteran cannot pay, but in almost all cases the lender is able to cover those costs through the loan.

      Because your agent is your voice when making an offer, that is many times the only place you can turn to overcome the ignorance of the agent on the selling side of the transaction.

      Good luck, I hope this is helpful.