VA Homebuyers Guide: Making Your Offer

Finding your dream home is just the first step of the homebuying process. Once you find it, you need to make an offer the seller can’t refuse.

If you’re in a hot housing market, that might be hard. But fortunately, there are ways to sweeten the deal and negotiate your way into homeownership. Use this article to guide you.

Step 1: Confirm Affordability and Loan Details

You’ll need to have a lender and get preapproved for a mortgage before you can submit any offers. This gives you an idea of what size loan you can get — and what price range you can afford.

When you find a house you like, you’ll need to make sure the monthly mortgage costs, property taxes, insurance, and HOA dues add up to a monthly payment you can afford. Then, you’ll need to submit your preapproval letter as part of your offer. This gives sellers confidence that your loan will close and shows them that you’re a safe bet as a buyer.

Keep in mind that a preapproval is not the same as a full loan approval. It just means the lender has taken a basic look at your finances and thinks you’ll be able to qualify for the loan. Once your offer is accepted, your loan will move into underwriting, which is when the lender will do a more in-depth analysis of your application and ensure you meet the proper loan requirements.

Step 2: Understand Earnest Money (Good Faith Deposit)

Earnest money, also called a good-faith deposit, is money you give upfront to a seller to show your interest in a home. If the seller accepts your offer and you end up backing out of the deal without closing, the seller gets to keep the deposit in full.

You’ll stipulate how much money you’re willing to give in your offer letter. Generally speaking, most buyers offer between 1 and 3% of a home’s purchase price, according to Zillow, but you may want to give more or less depending on how competitive your housing market is. Your real estate agent can also help you determine the right amount to offer on a case-by-case basis.

Earnest money deposits are always made via check or wire transfer (no cash) and then held in an escrow account — sort of like a holding account — until the transaction is finalized or ended.

An important note: As a buyer, there are ways to back out of a deal and still get your earnest deposit back. The first is by invoking the VA Amendatory Clause, which lets you renegotiate or cancel a transaction if a home's appraised value comes in lower than the purchase price. You can also include escape clauses — called contingencies — in your offer that can let you back out, too. These include loan contingencies (if your financing falls through), sale contingencies (if you're unable to sell your current home), and title contingencies (if there are issues with the home's title).

Step 3: Know Your Closing Costs — and How to Negotiate Them

Start making sure you have the funds to cover your closing costs next. These are fees you’ll pay to your lender, title company, and third-party service providers who help along the way.

Common closing costs include:

• Appraisal fees, for having your home’s value appraised
• Inspection fees, for your home inspector
• Credit report fees, to pull your credit
• Prepaid taxes and insurance charges
• Attorney fees, if your state requires an attorney to be involved in the process
• Recording fees, to record the deed and mortgage with your local government
• Origination, application, and underwriting fees, which compensate your lender
• Discount points, if you’re buying down your mortgage rate
• Real estate agent commissions, which can be negotiated as part of your offer. Following industry changes in August 2024, the VA now allows buyers to pay some or all of the agent commissions if needed, though this is still a negotiable term.

The exact cost of these fees can vary based on where you’re buying, the size and price of the home, your lender, and more, but generally speaking, closing costs typically amount to around 2 to 5% of the loan balance, according to Freddie Mac.

If you’re using a VA loan, there are limitations on which fees and how much you can pay in certain closing costs. For example, if a lender charges an origination fee, it can equal no more than 1% of your loan amount.

On top of this, not all closing costs have to come out of your own pocket. You can also negotiate to have them covered by your seller, home builder, or lender, which your agent can help you do. This might be more possible in a slow housing market or when a seller is particularly motivated to sell. Generally speaking, having the seller cover some or most of your closing costs will make a VA-backed deal go smoother.

Step 4: Crafting a Competitive Offer

Every offer is going to look different, so it’s important you work with your agent to craft one that’s competitive for the unique home, sellers, and housing market in your situation.

Depending on conditions, you may want to use the following elements of your offer to be more or less competitive:

• Contingencies: Generally, the more contingencies you include, the harder it is to close and the less appealing your offer is. Waiving some contingencies may be a way to catch sellers’ eyes.
• Inspection timelines: Shortening the inspection timeline — or the period in which you’re allowed to have the home inspected — can be a way to make your offer more attractive, too. This reduces the risk that your deal will fall through.
• Closing dates: Being flexible on your closing date is a good way to appeal to sellers, especially if they’re looking to move fast or they’re having to buy their own new home at the same time.
• Lease-backs: You can also include a lease-back in your offer, which allows the seller to remain in place and “rent back” the home for a short period of time after closing. This might be a good idea if the seller is moving far away or hasn’t found their new place yet.
• Escalation clauses: These are clauses that automatically increase your offer price if you get outbid. You can set the increments at which your offer increases, as well as your maximum bid, so it doesn’t get out of your price range. You may want to do this if your housing market is particularly competitive or the home you’re eyeing is getting lots of offers.

Your agent may have other strategies to make your offer stand out from the pack, so work closely with them once you find a home you like. Often, submitting your offer quickly is the key to getting noticed — especially if the housing market is hot where you’re searching.

Step 5: When the Seller Accepts (Next Steps)

If the seller accepts your offer, you’ll sign the purchase agreement and move forward with the deal. Usually, it takes anywhere from four to six weeks from acceptance to closing day, though it depends on your lender, seller, and housing market.

In this period, you’ll need to:

• Have the home inspected to ensure there are no safety hazards or hidden repairs lurking
• Get an appraisal done to verify the current market value of the property
• Go through underwriting, which may require providing additional financial documentation

When you’re in this limbo period, make sure to respond to your lender and agent quickly if they have questions or need documents from you. A delayed response will only hold up your home purchase further.

You should also safeguard your credit during this time period. Avoid big purchases and opening new lines of credit, and make sure you pay your bills on time. Late payments can hurt your credit score and make it hard to qualify for a mortgage loan.

Step 6: When the Seller Rejects or Counters

Sometimes, a seller will reject your offer and go with another buyer. This is a normal part of the process and may happen if your offer is too low, you included too many contingencies, or there are just better offers on the table.

In other cases, the seller will come back with a counteroffer — an offer that’s slightly different from yours that better reflects their needs and expectations as a seller. When this happens, you may need to:

• Respond with an additional counteroffer of your own
• Increase your earnest money deposit
• Offer more flexibility in your closing timeline or lease-back options
• Reduce the closing costs and seller concessions you’re looking to have covered
• Remove contingencies from your offer

Your agent can be a big help here and will know what the appropriate response is for the home and market you’re buying in.

Tips for VA Buyers to Strengthen Their Offer

If you want to ensure you have the best chance of success once you find the home you like, there are a few steps you can take from the start.

These include:

• Working with a VA-savvy real estate agent. They’ll know the many nuances of the VA loan program, as well as how to use those to your advantage as a buyer. They can also address any hang-ups sellers may have about the VA loan program. (For example, many worry about the appraisal process). Check out our full guide to finding a military-friendly real estate agent to learn more.
• Get preapproved. Having a loan preapproval in hand (not just a prequalification) is critical to showing sellers that you’re a qualified buyer. It gives them confidence that you will follow through with the transaction.
• Go in with flexibility: If you can, be flexible with your inspection, closing, and move-in dates, as this will help you better align with each seller’s unique needs.

Finally, just be responsive. When a home you like is on the table, be ready to act fast. Talk to your agent, loan officer, and other parties, and respond quickly when they need information or documentation. The more responsive you are, the quicker the seller will have an attractive offer on the table.

Have Confidence in Your VA Loan Offer

The VA loan program is a special one that only buyers with a VA Certificate of Eligibility can take advantage of. It offers low rates, protects you from various risks, and lets you avoid costly things like down payments and mortgage insurance. Just make sure you're working with a VA-savvy agent and loan officer along the way, so you can lean on them as your home search progresses. In no time, you'll have an accepted offer and be on your way to that dream home.