Jacksonville, Florida: VA loans at highest risk of negative equity


The Jacksonville, FL market has been on fire for the last several years. The average value of a Florida home was just under $405,000 – That’s up more than $56,000 from $345,305 in January 2022, making Florida #1 in  home price growth in 2022. While sellers rejoiced, recent buyers now face new obstacles as the market starts to shift. 

VA (Veteran's Affairs) buyers lead the way with the most dangerous equity positions of all, and with Mayport Naval Base and NAS JAX both in the area, there are many VA buyers in Jacksonville. While borrowers can put money down on their VA loans, most do not. This leaves VA as a 100% LTV product, and frequently closing costs are also financed, leading to a significant negative equity position from day one. 

Now this has always been the case with VA loans, leaving most VA borrowers to have to wait it out for a few years to regain some equity through appreciation and making payments towards their balance. 

The problem with the VA buyers for the last few years is that market values have increased at a record pace, creating a bubble of overpriced homes that were purchased with VA loans, which are now heading down in value.

Jacksonville price declines

Having zero equity means you are not able to sell your home and produce enough funds to pay off the loan balance and closing costs (7-8%). 

This is not a problem if you have no need to sell. Over time, homes appreciate and loan balances get paid down, improving your equity position.

But if you need to sell your VA loan home before you have equity, now you have a problem.

What to do when you need to sell your VA home and have no equity:

If you are unable to clear your loan balance and closing costs through the home sale, you will need to cover the shortage out of pocket, or pursue a short sale with VA.

Jacksonville short sales

Additional recent factors that make recent VA loans even more risky:

Starting in 2020, VA borrowers were offered covid 19 forbearances. Originally intended to be a short break from making mortgage payments, these were intended to last 6 months. However, as the national emergency continued to get extended, so did forbearance periods. As of this writing in January 2023, the federal national emergency was just extended an additional 3 months, into April 2023, along with forbearance offerings. We are now approaching a period in time where some borrowers have not made any mortgage payments for close to 3 years. 

VA offers a variety of workout options for those in forbearance or otherwise unable to pay, including a newly created VA Partial Claim Program, similar to the HUD Partial Claim Program.

The problem with every single loan workout available is that they all increase the balance of your loan, which is already at 100% of the homes value or higher for most VA buyers. 

Increasing loan balances during a time when values are going down creates a negative equity situation, leaving home owners upside down and unable to sell without a short sale.

limited equity

As the Jacksonville market shifts, more and more VA buyers enter a high risk equity situation. This becomes a problem when buyers are unable to pay the mortgage payment and now face foreclosure, or are forced to move - which is a frequent occurrence for our military members.

sell in preforeclosure

In addition to their zero equity position, Jacksonville home buyers currently face the highest mortgage payments in all of history.

highest payments

With the highest mortgage payments in history, an abundance of loan balance increasing workout options, and the zero equity position buyer of the average VA buyer, we will be soon be facing an abundance of VA buyers that will need help getting our of their homes.

Need to sell but upside down in your VA loan? VA offers a short sale solution called the VA Compromise Sale, which allows you to sell your home for less than is owed on the mortgage.

VA Compromise sale

We specialize in VA short sales!

Get a free, no obligation consultation today!

Working with Minna was a wonderful experience. Unfortunately, we had to do a short-sale on our home. We also had a VA loan, which complicated the process a bit. My husband and I were nervous wrecks about the situation but Minna was calm and positive about it, and in the end everything worked out perfectly. I would absolutely recommend Minna.


Last Updated on January 25, 2023 by Minna Reid


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