Using Your VA Loan in a Crazy Housing Market (with JP Pena)

Whether you’re PCSing across the country or just down the road, you still need to find a place to live. But base housing is often not the right fit or even readily available, and finding a home off base can be really expensive, especially in a tight housing market.

Military members and veterans have access to a special home loan benefit through the Department of Veterans Affairs, the VA home loan. Yet using it can feel too complicated, while how it works is often surrounded in rumor and misinformation. So what’s the real deal? Today’s guest, real-estate expert and military veteran JP Pena, gives his best advice for buying a home using a VA home loan.

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The following is an edited transcript of this episode.

Amy Bushatz: Dealing with packing up and moving your life and stuff is a stressful process as is finding where you fit at your next duty station. School, work, friends. It’s a lot. But in, there is one more major thing: figuring out where you’re going to live and then making it happen. And where you live and how much you pay for it in monthly rent or mortgage can have a huge, huge impact on your lifestyle, happiness, and cash in hand or savings for other stuff in life. It’s easily the biggest decision of any military move. And that’s really saying a lot. So naturally it’s important to have someone join us on the PCS with Military.com podcast to offer some practical insight on house and rental hunting, affording the home loan, getting the most for for your and all that other stuff.

And that’s what today’s guest JP Pena is for. JP isn’t just a Hollywood based real estate agent where he’s grown his expertise in the real estate business for more than a decade. He’s also personally used his VA Home Loan to purchase a house. And since that VA Home Loan is a benefit to almost everyone who has served, it’s important for us to know about using it.

JP, welcome to PCS with Military.com.

JP Pena: Thank you, Amy. Thank you for having me. And it’s a pleasure and honor, anytime that we could just put something out there, content to help veterans, whether it’s just a great, massive breakthroughs or utilize their home loans to achieve that American dream. It’s a pleasure to be a part of it.

Amy Bushatz: Awesome. So JP, can you start by telling us how many times you have moved with or without the military, so that’s during your military career, after it, before whatever.

JP Pena: So Amy I’ve been fortunate that I didn’t have to move in long distances, like most active service or many other service members have. I stayed in California, so-called Camp Pendleton, San Diego, Orange County, and then basically deployed overseas.

So all my residents have always been in California. But I do know the hassle that it takes from at least a county, moving from a county to a county, going through that process, having to find something new during that process and how much of a headache it can be at times.

Amy Bushatz: Oh, yeah. You know, every move comes with its own challenges. I like to remember that moving, OCONUS, challenge. Moving in the states, different challenge. Moving across town, totally different underestimated challenge. All of these things are, have their own little things to tackle. And so I think it’s just really important to remember that no move is created equal. And no one has it worse than anyone else. It’s all a challenge.

JP Pena: A hundred percent. And then in the military, it’s nobody really explains the process to you. And I think that’s really where the problem starts. I remember when I came back from Iraq and I had to find a place to stay, it was basically just, Hey, welcome back.

You had formation. You’re going to get three days, four days off to go figure your stuff out and good luck. You’re dismissed. And I drive up to my base where I was stationed at prior to me going to Camp Pendleton. And I’m sitting there like, wait, I don’t have a home. I don’t have a place to go. Like what I did, I call my parents now ?I call my parents and they’re divorced.

So I’m like, wait, so where am I going to stay at now? So it’s a complete mess. Quite the unfortune that there’s nobody to really explain the process, provide a blueprint and guide you through that.

Amy Bushatz: Yeah. So give us a little bit of a taste of your background. You mentioned deploying to Iraq. After getting out of the Marine Corps, how did you get into real estate and work as a loan officer?

JP Pena: I started with my passion of real estate in a very young age. My mom used to clean homes all over the west side of LA. And as far back as I can remember, I would draw these homes. I would get mesmerized by the architectural design, the how grand they were.

She cleaned homes in Beverly Hills and the Hollywood Hills. And I would walk through these, these places that were so big. Living in a 450 square feet apartment, my whole life for me, this was like, wow. So I would draw these homes. I would, picture myself living there. I remember telling my mom one day, I’m going to either live in one of these, I’m going to sell these types of homes.

And so when I exited the military and I tried to pursue a study in architectural, and it was just so difficult because of deployments and coming back and forth. And I couldn’t maintain some sort of consistency in school. I said, well, the closest thing to architectural is real estate. And I got my real estate license. And since then I’ve been selling real estate for the last 15 years.

Amy Bushatz: Awesome. Awesome. And your work in real estate has that inspired you to, obviously you love it, you wouldn’t have kept doing it, but how does that changed how you live and how did serving in the Marine Corps change your perspective on real estate?

JP Pena: I will say that the one thing that the military did, which is very important specifically in the real estate business is having routines, the commitment and the discipline. Most people have this misconception that real estate is something where you just show up and it’s like a regular job and people just call your phone and just keep on ringing off the hook of people trying to sell homes or buy homes. And it’s clearly not that way. I average anywhere between four to five hours of cold calling, prospecting and constant just outreaching. So, everything that I learned from the military as far as discipline and maintaining a routine and being committed has helped me progress and excel in this business.

So it’s quite challenging. But again, anything we do in the military was just that –a challenge and we appreciate any challenges we could get. And once we overcome then, the ability to obviously enjoy that win, it’s what makes it all worth it.

Amy Bushatz: Yeah. Yeah, for sure. So I think we all know house hunting and moving is stressful. I mean, that’s not like a secret or a surprise. Talk to us about some things you see people do around finding housing that makes it more stressful then it has to be like, what are some things that people, activities, people do or attitudes they bring to the table that really make this beyond the pale.

Like, we don’t have to be doing this, but here you are.

JP Pena: You know, if we had about three hours on this podcast, I think we probably nail that down. If I could bring it- I say the top two would be one, asking the wrong people for advice. And the second one would be not being prepared. There’s this misconception that people think they know exactly what they have without really going out there, getting qualified, knowing what the real numbers are.

And they go based off of that. For example most of the military people I get, right? This is not to say that officers are bad. I’m just saying this is most commons with officers, is they think they’re in other financials very well. And when we go to the qualifying process, taxes were done incorrectly, certain financial structures weren’t properly disclosed a certain way. And so therefore it just makes it a lot challenging for a price point that they want, knowing that, well, because he did all this stuff and you were advising correctly, now it’s going to be a lot more harder for you to qualify for that number that you want.

And that is something that doesn’t sit well with a lot of people, because now they’re like, wait a minute, I make this much money. I should be able to buy that. Yeah. In paper it looks good, but once we send it to underwriting and the VA looks at it, they’re not going to like that debt to income ratio, therefore that number that you truly want, and it’s not going to be able to happen. In fact, we’re like about $200,000 less than what you want.

Amy Bushatz: And what’s the second one you said you had two.

JP Pena: Oh, the second one is just getting bad advice from the wrong people. I’ll give you a short story right now. There’s this veteran I was working with for the last eight months. We helped them get his credit good to go. He had a low credit score. We got that up.

Got him everything prepared. This guy is ready, calls me. And he’s like, Hey man, so I’m already buying a house. I’m an escrow. And I have all these issues going on and I’m like, wait, what do you mean? It’s not like, well, it turns out that the condo buying is not VA approve. And I said, well, man, whoever is helping you out should have done that way before you even committed to it because it’s one of the first things, a requirements that the lenders kind of want. And not only the lender, the VA, because they’re not going to finance something if it’s not VA approved. And the VA has these guidelines for condos, townhouses to ensure that the veteran’s well-protected. So if it doesn’t meet those guidelines, it doesn’t get an approval.

So he’s four weeks into this escrow. They have removed all the contingencies. That means that at this point, if he tries to cancel, he loses his deposit, and it’s $5,000 deposit. Well, it turns out that his friend told him to use this agent because he would give them $2,000 in the backend if he used them. So he got excited for that, uses this guy. This guy has no experience working with VA. So now he stuck in an escrow, where he’s going to have to cancel because the VA won’t approve this condo and he’s most likely going to lose his $5,000.

Amy Bushatz: Yeah. Yeah. So, what I hear you saying is two things cause we’re gonna reverse engineer this here in a second, but what you saying is: people think they can walk into this PCS or this move or whatever it is that’s making them move right now and just take care of it without any sort of preparation or real planning in advance from a financial standpoint, without thinking through the future of what they want. And that can be like that let’s admit that’s going to be really hard to do if you just moved. So I just moved, I just bought a house and now you want me to think through the future of what I want, but I have it not unpacked by boxes really? That’s hard, but that’s what I hear you saying is that’s a step that you think is necessary.

JP Pena: Yes, a hundred percent. And I think you hit it right on the nail. It’s just, it all falls back Amy, to sort of why we’re having this podcast in the beginning, because I think that our veterans are not educated enough and when they get out, it’s basically, well, Hey guys, I have a question in it and they throw it out there to the masses and I, with the power of social media, basically, it’s a simple post on Facebook.

Hey guys, I’m trying to do this. Anybody can help. It’s actually 30% of the veterans that approached me regarding buying a home, have no idea that they could use their VA benefits. That’s just 30%. The mass amount, and this is an actual true analysis done by the VA is actually over 60%. Over 60%.

So that means that they get out, and they have this misconception that in order for you to use your VA benefit, you have to be service- connected, or you have to be disabled, and that’s a hundred percent incorrect. You don’t have to be disabled to utilize your VA benefit. So these veterans, they come out, especially these new veterans, the millennial ones coming out, they come out and they think, oh, I’m perfectly fine.

I’m not a disabled person, so I don’t need the VA benefit because I won’t qualify for it. So it all starts from the root of educating the veteran while they’re in service that will, when they get out, you limit that damage because there’s a lot of damage control that happens after the fact. I get so many calls. This morning I received a call from a veteran buying a property in Texas, and they sort of stirred them out of the VA loan to use FHA, which is a 3.5% down payment requirement. And they did that because the lender told them the rates are better. And now he’s like, wait a minute. I’m not liking this rate. And I’m seeing online that you could get a VA loan for 3%, yet they’re putting me on a 4.2. How do I switch it at this point when they have a final approval, that’s very hard to do at this point. So most likely this veteran is going to put 3.5% down is and they’re going to end up closing out a 4%, and most likely higher fees with private mortgage insurance because he chose the wrong loan.

Amy Bushatz: Yeah. Yeah. So, we’re gonna talk a lot about VA loan here in a couple of minutes, cause I really want people to understand what that is and what the rules are because it is not as simple as it could be, but shocker that’s everything with the military, anyway. Okay. So. What let’s first talk about what are ways PCSing military families can make the process easier on themselves from this standpoint.

So you talked about planning ahead. And what about getting advice from the right person? Like how do you even know who the right person is?

JP Pena: Start at least a year before you’re going to be PCSing. Most veterans or service members start Within six months, I have a gentleman from Dubai right now. He’s PCSing next month. He’s just now starting this whole process and investigation asking the right questions and all this stuff. It’s late, because for example, if you’re going to be moving to California, which is one of the most expensive states, especially LA, you’re not going to find a home in 30 days.

I’m going to tell you that right now you’re not, the market is so competitive. You’re going to get outbid. It’s going to take at least by average, 90 to 120 days. All right. So starting at least a year in advance, I’d rather say over-prepare, and be ready to have a successful transition versus trying to wait last minute and do it.

So starting in a year ahead, started interviewing your lenders, start interviewing your realtors get a realtor that knows the area get a realtor that has the ability to provide some great video footage and show you properties prior to you coming over that way, you get an idea of what the neighborhood looks like.

Get an idea of what the city looks like. Get an idea of what’s around. Kids have them give you a report of what those schools look like? Is it going to be something that you’re going to be okay with your kids? I have a veteran, uh, an active service member of this PCSing in here to LA he’s very big on jujitsu.

He competes in jujitsu, his sons could pizza jujitsu. So I had to drive to four or five different studios, or academies that meet their requirements. And based off of that, that’s how they wanted to find a place to live. So it’s knowing somebody that could go above and beyond to not only provide the right information, but give you an insight of what’s happening.

If that’s going to be a right fit for your family, is it going to be a good can be for your work that knows the distance and working. For example, we have a, at least a total of 12 bases within the LA radius. I can tell you right now that each one of those is going to have a complete different time, depending which way you’re going on the 1-10 freeway, for example.

And that could be a huge difference because if you’re going to be showing up by base at 6:30 AM every morning, and you’re going south at 1-10 at seven in the morning, that’s going to take you about an hour.

Amy Bushatz: Right. And that’s something that you, as a real estate agent knows. But somebody who’s moving there doesn’t know, why would I know that.

JP Pena: And this is why it goes back to the other thing, too, for example, you got Redfin, you got Zillow you got all these other sources that veterans get intrigued or service members get intrigued because they will, they’ll put stuff like, you saw us and you get this $2,500 bonus. See, this is another inside thing, Amy, that a lot of people don’t understand. Any lender could give you credit. Any lender — by average, my veterans get anywhere between $2,500 to even $9,000 in credit for closing costs. So anybody can provide you that credit.

The problem is one, they don’t ask the question, because the lender’s not going to tell you nobody’s in the business of giving out money. If I use you, Amy as my loan officer, you’re not also going to tell me unless, I mean, you seem like a nice person. I’m sure you would be like, JP I’ll take care of you I’m going to give you this to closing costs. But most likely, most other lenders are not going to tell you that. Now when these people advertise these third party agencies say, Hey, we’ll provide you this amount service can service members get excited by that and they say, oh yeah, utilize stuff. And it’s kinda like a, one of those bait and ditch scenarios where they’ll get you in. But then they don’t tell you in the backend how bad the service is, how they are not even the ones that are going to be really representing you. Zillow does the same thing. Basically seller you get a lead for them, then it’s basically going out to a pool of agents that are paying for advertising. You don’t know if they are experienced in VA. You don’t know if they have a very even dealt with a VA, or especially if it comes to PCSing, if they ever have dealt with anybody, transitioning, coming this side. That’s the downside. So knowing who you work with is very important.

Amy Bushatz: This is such a broad topic. It’s hard just to have one episode talking about this, cause there’s just so many things to consider. Um, I want to sort of take a sharp left turn real fast to make sure we talk about it. When people are talking renting versus buying. You’re mostly selling homes, I don’t know if you personally rent homes out some real estate agents help with that. Some don’t.

JP Pena: I do, yes.

Amy Bushatz: So when let’s say I called JP, I’m moving to California, I’m moving down there to Southern California with the military. Um, I think we’re going to be there three years. Not sure if that’s somewhere, we got to come back to think it might be uh, should I rent or buy? What do you, What do you think I should do? What do you tell people?

JP Pena: That’s a great question. So I’m a big believer that everybody’s scenario is going to be different.

Amy Bushatz: Sure.

JP Pena: More times than not. I actually tell people not to buy, a hundred percent. Because it doesn’t make sense. I have this rule and I usually tell people that this rule consists of you looking at a five-year forecast. Within that five years, can you make money on this property? Can you rent it and make money? Or if worst case scenario comes, can you dump it liquidate and come out winning? If those threes do not align, then you shouldn’t buy you shouldn’t buy. I have veterans that come in, just like, look, I’m in the process. Or for example I’m not sure if all branches have this, but in the Marine Corps there’s such a duty call INI, which basically you come in for four years you’ll stay in a base, most likely a reserve unit base.

And you’re like the instructors or an instructor. You basically ensure that reserve unit operates a certain way. A lot of these guys don’t want to sell where they currently live. Although they have to make a very big commute, and they’ll ask me, JP, should I buy, should I do this? And then I look at the areas they’re looking at and look what the cost is going to be, the upkeep.

And I’ll say, you know what? This doesn’t make sense for you. You’re actually better off renting then to buy that because when it comes to you moving, you’re not going to be able to rent that and make the money to cover your mortgage. And second of all, if something worst case scenario happens, and you have to go back to where you’re coming from, there’s no way you’re making money on that. There’s no way.

And I’ll give you a perfect example. I had a property in Downey, California. We had that for awhile. We rented it. We sold it. I’m currently renting now because I’m exploring a new neighborhood that I want to transition to. And it turns out I don’t like this neighborhood. It’s amazing. My business has gotten great, but it wouldn’t have made sense if I bought it, cause I look back now and I’m like, well, if I would’ve bought this a year ago and tried to sell now that I don’t like it, I’m moving down to another location. I would’ve ended up losing a lot of money. So everybody’s scenario is going to be different. And this is where it’s key, who you work with because there’s going to be people that are just going to try to sell you stuff. And I’m more about let’s build that relationship versus let’s make commissions because that’s going to pay it forward a lot more.

Amy Bushatz: So I want to now transition to talk about the VA loan. I told you we were going to be all over the map but we have been mentioning VA loan earlier in our conversation. So I, I know this is a really important topic. And as you mentioned earlier, and as I know, it’s very complicated and difficult to understand, and underutilized because of that, like, people just don’t understand the benefit or what it is.

So let’s break it out. Give us a rundown for some basics. First of all, what is a VA Home Loan and why is it different than a regular loan? Just any other home loan?

JP Pena: So the VA loan was created as a way to provide equal opportunities for veterans in the competitive real estate market. What this means is that veterans, not all veterans are going to have the ability to make huge down payments.

And they came up with this idea of providing something that’s backed up by the government. And what I mean, backed up by the government is that anybody that owns a VA loan and defaults the government will cover up to 25% of that. So it’s basically saying hey, it’s like having a co-signer that’s willing to pay 25% of that loan in the event that you ever default. Not only that, but it’s meant to be more reasonable as requirements for a veteran to qualify with it’s perks if you have such thing as a service connection. For example, if you’re service connected above 10%, you don’t pay what’s called a funding fee. The funding fee is basically what keeps the VA alive. It’s what basically keeps it moving forward. So if you’re not service connected and you’re using this loan, you can pay anywhere between one and a half to two and a half percent as a funding fee from the purchase price.

And that gets added to your loan. There’s really no big requirements that you would have. For example, let’s say if you went on a conventional alone or a FHA loan. There’s also no private mortgage insurance, which is huge. So for example, in the example I gave you earlier you have this gentleman who got steered from using his VA to going to an FHA.

That means that on top of having to put 3.5% down, he’s also going to have a monthly additional payment of anywhere between $350 to $450 a month to cover an insurance in the event he ever defaults. He doesn’t get that money back. With the VA, the VA itself is telling you, Hey, no, you don’t have to pay that. We’re it’s just off the bat saying if for any reason something happens, I’ll cover 25% of that.

The other best thing about VA is that you could use it as many times as you want. As long as you get out of the VA that you currently use, usually you refinance it, do a rate and term, it takes out the name VA goes into a traditional loan.

Nothing changes. The rate stays the same. Now you’re able to utilize that VA again. In some states where prices are a lot lower, you have the ability to use that same entitlement, for example, let’s say you bought a property for $150,000, and there’s another property down your street for another a $100,000. And your entitlement allows for you to still be able to purchase that. You could have both homes under your VA loan. So there’s so many perks with the VA loan that quite honestly, you’re not going to find in any other loan, even the fact that you could buy income property. I own two buildings, a three unit and a four unit. Both of them were bought using my VA loan.

Amy Bushatz: So I want to come back to income property here for in just a second. Because there’s a little bit of a catch with that, I know. But when we talk about percentages, the percentage, you know, 2%, 1%, that is a tiny number. But when you started talking about it, in terms of actual dollars compared to the purchase price of the home, we’re talking thousands of dollars. Like these are not tiny numbers where if you had a $350,000 home, which in a lot of parts of the country would be, good luck to be able to do that. You know you’re looking at say like $7,000 in that funding fee that you’re not paying because you used a VA loan. Am I right on that?

JP Pena: Yeah that, that is correct. Unless you’re service connected, then it will completely be waived. So if you’re above 10% on service connection, there’s absolutely no funding fee, so my average price point and in my area, $650,000.

Amy Bushatz: Ok, and you’re in Southern California so context is king.

JP Pena: Yeah. So $650,000 right? Average funding fee that I seen in the last four transactions was about $15,000. So $15,000 right? Now, let’s say that same person went FHA. So $650,000, right? A takeaway 3.5% that he put us a down payment. That’s $22,750 plus the $450 that he’s going to pay a month for premium insurance to a private mortgage insurance. And let’s say he holds that, I don’t know, let’s say they sell that in four years.

So that’s 5, 54 times four almost $21,000. So if you look at the constant difference, $15,000 versus $24,000, that he’s not going to get back, that he basically just threw away, it’s actually a huge saving for veterans. And also in rate. Most likely the VA rate is going to be a lot lower than what they’re going to pay on FHA because FHA is highly driven on your credit and on your debt, where with the VA loan, you basically have a lot more space. They’re more lenient in regards to your debt to income while still giving a very competitive rate. For example, I have a guy right now that hit like at the max max debt to income ratio, which I think it was close to 60%.

He still walked away with a 3.75 rate. That would never have happened with FHA. First of all, I don’t think underwriting what even allowed it, DU wouldn’t even approve that. And I’m talking loan lingo here, but DU it’s like the sort of portal underwriting system that spits out the approval. So you type everything in and if it doesn’t like it I’ll say deny, if it likes it it’ll say approve.

Amy Bushatz: Got it. I appreciate you breaking out the acronyms for us because though we be military type people, we are not psychic on the acronym. Somebody, you either have to pretend you know what they mean, or you have to actually know what they mean. So

JP Pena: I thought we had a bad in the military. Man, when I was doing loans, they have so much acronyms for everything that I was like either an officer that used to serve came up with this stuff, or man, they had nothing better to do with it.

Amy Bushatz: That’s funny. Okay. So we’ve talked a lot about the pluses of using a VA loan, which I mean really come down to at the end of the day money. You’re, not spending as much and it’s easier to get a loan because you don’t have to spend as much. What are some downsides or some challenges like it’s not all roses. What are some challenge?

JP Pena: The biggest challenges you’re going to deal with the VA, it’s on two parts. One part, if you’re going to buy a condo or a townhome, because we have to deal with the approval process. And that could be quite a challenge. Surprisingly, even in LA, the amount of condos that we have to go through to just try to get a veteran into one of them is just horrendous. The process really sucks because there’s not that many. And it’s not the fact that the complexes itself are bad, just approvals were never filed and to send an approval with the VA, will take months, even possibly years, just to get that through.

Not only that, you would have to get the full cooperation of that HOA to send over those stocks, which who knows how long that could take alone. If you have ever bought a condo and just you’re trying to get HOA docs for a normal sale. I mean they drag their feet to the minute before they send everything.

So imagine now getting all this stuff of years of financials so you can now send to the VA to get an approval, who knows. So that’s one downfall.

The other one is the fact that not a lot of agents and sellers are aware of the VA product. They still have this misconception that the VA is the same that it was in the 90s.

And in the nineties, it was not the best program possible because there were so many limitations. There were so many requirements such as the seller, had to pay for certain amount of the closing costs. If that didn’t work, then more monies were required. So sellers became a very just weary of dealing with any VA.

So when you have new agents and you hear a hundred percent, they’re just like whoa. I heard of this loan, we definitely don’t want to do that. So it’s a lot of us having to outreach and teach the new agents or agents overall of what this process really is and how it has changed, and how now it’s actually as good as the conventional loan.

Amy Bushatz: Okay. And you mentioned investment properties earlier, but the VA does have an occupancy residency rule, does it not for buying it? So explain to us how you have investment properties around that around that rule.

JP Pena: So most properties that I have well, th the two properties and some of my veterans that have purchased properties, we have lived on the property for a certain amount of time prior to having. So there is a rule normally, if I’m not a hundred percent sure on this for the majority of us have been there at least for six months, and then either have transitioned due to work or schooling or anything within that nature.

And therefore it’s a hundred percent allowable for you to be able to rent it. And this rule usually applies to up to four units, anything over that you still can buy it, but it’s just a bit more complex. It there’s a lot more requirements that come to it, but from one to four units, as long as you’re there for at least six months, have you lived in the property and then you have actual reason on why you’re moving. Whether, like I said, work school or military base, you have to PCS somewhere else. Then it’s a hundred percent allowable for you to be able to rent that out.

Amy Bushatz: I know last year in the PCS with Military.com podcast, where we interviewed someone about VA Home Loans I confessed that, that we had just come home from vacation in Hawaii and I was thinking to myself, self it would be mighty nice to buy a condo down here using the rest of our VA loan. And then, just have it as vacation home and rent it out the rest of the time. But it doesn’t work like that. And so I just want people to know that it’s this isn’t the VA loan comes with rules.

It comes with things you have to do. You can’t just roll out buy yourself, a sweet condo in Hawaii I am very sorry to report and using this benefit. And then just go from there. We could probably make it work over time, but it’s not going to work the way I thought it would.

JP Pena: A hundred percent and listen, Amy, one of the things that I always say, it’s like, smart choices early in your military career will pay off in the long run tremendously.

Like I usually try to get new veterans that just basically joined. I mean, service member, I keep on saying veterans just because I deal with so much veterans. And I was just at a veteran event yesterday. So it’s like veteran, veteran, veteran you know, what service member active service they just joined. I try to tell them, look, your first property should be a duplex, get a duplex, get something with an ADU, start building that cashflow, get in the habit of making money early on. Because they have this misconception, and I had to same, I mean train of thought when I was in that it was going to last forever. It was, I never saw myself stopping after eight years. I never said: at this amount of time, I’m just going to walk out of the service, right? No, it was just like I’m living the life. This is just going to go on. I don’t have to worry about pay or anything.

First condo that I got in Long Beach using my VA loan, I was still in, but I had no idea what I was doing. I just got it. And I was like, oh wait, like, okay, cool. And then I was like, ah, I don’t like this place no more. Sold it. I made $30,000 on that sale. And then instead of reinvesting it, I went partying with $30,000.

I’ll say, hell yeah, Vegas here I come. So it goes back to, if we start educating our veterans on how to properly financially prepare. And it could be as simple as like, Hey, you could buy just something small for it in the meantime, and learn how to start building that cashflow learn how to start building a portfolio. When you exit your odds of just accomplishing so much more will be that much better.

Amy Bushatz: That makes so much sense. One more VA loan downside, or rumored downside perhaps, I want to address if you don’t mind, is in this market I’ve heard a lot of people say that they can’t find a house to buy that they’ll except a VA Home Loan.

JP Pena: Oh I love that question.

Amy Bushatz: OK yeah. And I’m not like, what does that even mean? So can you tell us what does that even mean?

JP Pena: Well, it goes back to the same misconception that I told you that agents or just sellers are not aware of what it truly means. I will say in January I’m, 12 out of 12 on VA offers, all my 12 offers have been accepted.

Now I think part of it has to do I’m well-known in LA, so they know me as the VA king. So the minute that I send something for a fact, and they’re like, okay, this is legit. We’re going to, they’re going to close. No questions asked. We’re gonna accept it. But for anybody else out there, that’s sending, I think it comes down to the presentation and what your agent is doing to let them know exactly what that loan is.

I’ll give you my process of sending an offer. One, I will first send you a bomb-bomb video, explaining what I’m sending you. Because a lot of the times, the minute they see VA, if it’s a new agent or it’s just an old school agent, that’s traumatic by any experience he had with the VA in the nineties, they’re just going to delete it.

So I’m going to send you a video first and on that video I’m going to be like, Hey, I’m introducing myself. They see my face. They see my background with all this military stuff. And so I’m talking about it. I CC my lender in it with any questions that they’re going to have. So I might email there’s like five questions, misconceptions that people think of the VA and I’m already answering it. And I’m also letting him know that please contact me so we could further discuss this. They always call me. They always call. The first thing they’ll say is like, wow, nobody’s ever done that. And second of all, tell me more about this loan because we’re intruiged.

When I get that all taken care of, then we send over the offer. We already built a dialogue. They like it. And I would say it’s a 50-50, but we always get a really good chance of getting offers accepted because we already set the standard before we even send anything out. So that’s going to be the biggest obstacle you’re going to have dealing with the VA. But if your agent is putting that much work up front, your success rate is going to be that much higher.

Amy Bushatz: Okay. So. There is also, the VA also requires comps and home inspection that I’ve heard are off. I’m just like now telling you different things, rumors about VA loans I’ve heard- that I’ve heard are extra tough and hard to overcome, especially when sellers have offers from like cash offers or offers from something that they’re used to working with.

First of all, is that true? And second of all, what is your advice for people who are dealing with either that rumor, misconception or actuality?

JP Pena: So assuming they’re talking about the appraisal aspect of the VA, because that’s the only one that’s going to require an inspection. It’s really quite simple. First of all, you are not buying a fixer. I’m gonna tell you right now, if your agent is telling you that you could go out and buy a fixer with your VA loan, that’s not gonna happen. It will never get approved. So you have to know that off the bat, as long as it’s livable, it’s not missing doors, it’s not missing windows. There’s not major cracks in the inside. It’s not missing a toilet or just crazy stuff like that. Your chances of the appraiser in the appraisal inspection passing, it’s pretty high. Comparable wise, okay. So we basically have an issue where there’s so much competition that some of these buyers are increasing the purchase price by some crazy number, right?

So let’s say the property is being asked for $500,000. Somebody comes in and they put $550,000 your comparables in the area between $535, $540. In us, in order for us to even be in the playing ground, we would have to be at that $550. You can write a $550 offer and leave it up to appraisal to decide what happens, which you are protected by the VA clause that if it doesn’t appraise then you are able to negotiate. If for some odd reason, it doesn’t appraise, most chances sellers will negotiate a number with you. If that doesn’t happen, then you have an out, contingency is still in place. You can move on to another property. Here in LA, for the most part, we have always had sellers work with us when it comes to a situation like that. And what I mean by working with us would be something like, let’s go back to the $550 example. Appraisal came back at $545, we offer $550. They’ll say like, you know what, $546,500 and we’ll deal it.

So in most cases, I’ll credit the amount to make up for that difference. The lender will sometimes step in. Last scenario would be the buyer saying, Hey, you know what? I got the funds. There’s no problem I’ll cover it. So there’s always a solution and a play that you could roll for every scenario, but in most cases, the seller will be willing to work with you.

Amy Bushatz: Yeah. Yeah. Okay. That’s good information. I, you know, I figure if I’ve heard the rumors, someone else has too, so like to.

JP Pena: But it’s not like, okay, for example, I had a, an offer that I sent out last week. And it was the same question you just asked in regards to inspection, which is very dramatic. The agents said that, Hey, I heard that if it’s not dual pane windows, they’re not going to pass it. There has to be a certain color inside of the house that there, the carpet cannot be dirty. If it’s wooden floors that cannot be messed up, up, up to a certain percent, or it has to be changed. I was like, wow. Where did you get this info? Because that is completely wrong. Like, absolutely not true. So there is rumors out there, in regards to misconception of the inspection, but it’s not as bad as most people think. As long as you follow that rule of thumb — it can’t be a fixer, can not be missing doors cannot be missing windows. Just think of it as like, if it’s really screwed out, most likely the VA inspector won’t pass.

Amy Bushatz: Yeah. Good. Good to know. Thank you. So give us some more, like we’ve talked about, we’ve sort of walked by some very practical things. Can you give us some very practical advice, like specific steps, specific advice on using that VA Home Loan during a PCS to walk us out of this conversation.

JP Pena: Yeah, sure. So first thing would be, have a list of three agents and three lenders that you’re going to interview. Start as soon as 12 months before you know that you’re going to PCS. If you find out later on, the sooner the better, once you interview those those agents, whether you get a lender, your agent also get a history of what VA deals have they done.

And I like to personally ask the scenarios. Can you tell me the scenario? Because it could be something like where it was such a great, easy, fast deal that no complications and he just might’ve one off one and it just worked out. But what if it’s a little bit complex? Like me PCSing, for example. Have you ever dealt with somebody PCSing? It’s a whole different transition program. It’s a whole different step. How did that work out? And what were some of the pros and cons that you dealt with? How can I do something better to prepare my move?

Also, do you work with any moving companies that, that you could refer to me? Do you guys have a concierge department that will also guide me through any steps? If you’re not available who is going to be also available in your team to help me? So all these questions are very important because what you will realize once you transition or your PCSing is that the closer you get to that date, everything starts moving pretty fast. And when it starts moving pretty fast, you’re going to forget certain things.

Some things are not going to go the way you wanted them. But ensuring that you have a team behind you that’s already working on all this to make that transition a lot more easier, it’s going to be groundbreaking for you.

Amy Bushatz: That’s such a, that’s such good advice. Thank you so very much for giving us that and thank you so very much, JP, for joining us on PCS with Military.com. This has been an incredibly practical, and I might say wide ranging, but not too wide ranging conversation. So thank you so much for joining us.

JP Pena: Definitely. My pleasure, Amy.

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