9 Myths and Misconceptions about VA Home Loans!

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    The VA Home Loan is an amazing benefit to our service members, but it is often misunderstood. Here are 9 myths about your VA entitlement that we can dispel today!

    Myth #1: It’s not a great loan product. – Fact: A VA loan offers no down payment for purchases up to $417,000 and no mortgage insurance. FHA loans require 3.5% down as well as mortgage insurance. Conventional loans need a minimum of 5% down and mortgage insurance on anything less than 20% down payment. Interest rates are typically lower for a VA loan. Lenders are limited on what fees they can charge to borrower on VA loans. Sellers can pay all the buyer’s mortgage related closing costs as well as up to 4% in concessions, which can be used to cover prepaid expenses, a check to vendors like a furniture store or Lowes, or even paying off collections or judgements at closing.

    Myth #2: Veterans are “guaranteed” one. – Fact: No one is guaranteed a VA loan. Even service members with a VA loan entitlement must still qualify for a loan with a lender. The term “VA loan guaranty” refers to the amount of each VA loan that is backed by the government. If the borrower defaults on the loan, the amount under guaranty will be paid back to the lender by the government. The foreclosure will still go against the borrower’s credit, so it doesn’t mean you can just “give the house back to the VA”.

    Myth #3: You need excellent credit to get one. – Fact: Most VA lenders are looking for a minimum of a 620 FICO score which is actually a “Fair” credit score (a “Perfect” credit score is 850). VA loans also allow Veterans and active duty military members to bounce back faster after a bankruptcy, foreclosure and short sale. Borrows may be eligible for a VA Loan two years after a Chapter 7 bankruptcy discharge; one year after filing Chapter 13 bankruptcy; and two years following a foreclosure. Some lenders have no required waiting period following a short sale. For a conventional loan, you would be looking at four to seven years before being able to buy again.

    Myth #4: The appraisal is a nightmare. – Fact: While it is true that VA loans are not designed to fund a dilapidated fixer-upper, the VA’s Minimum Property Requirement guidelines are to ensure that the service member purchases a home that is “safe, structurally sound and sanitary”. The guidelines require: plumbing and electrical systems be in safe and working condition; heating and roofing must be adequate; loose paint must be scraped and repainted; no leaks, excessive dampness, defective construction or decay; no termites, destructive insects, fungus growth or dry rot. Choose a home in good condition and the VA appraisal will be no problem.

    Myth #5: They take forever to close. – Fact: With an experienced lender who specializes in VA home loans, closings can often happen in 30 days. There is a misconception that VA buyers are weighed down with extra paperwork and red tape. The reality is that greater automation and efficiency, as well as other improvements in recent years have helped the VA Loan Guaranty Program more than keep up with the pace of other loan products.

    Myth #6: You can only use it one time. – Fact: Qualified Veterans and active duty service members can use their VA entitlement over and over again. It is, in fact, possible to have more than one active VA loan at the same time.

    Myth #7: You can’t buy a short sale or foreclosed home with one. – Fact: Provided the home is in good condition and meets the Minimum Property Requirements for a VA appraisal, a VA home loan can be used to purchase a short sale or foreclosed property.

    Myth #8: Surviving spouses don’t qualify for one. – Fact: Not only can certain surviving spouses be eligible to use the VA entitlement, they are also exempt from paying the VA funding fee.

    Myth #9: You can’t get one if you are deployed. – Fact: If you sign a specific power of attorney designating a spouse or someone else to act on your behalf, that person can complete a VA home loan purchase for you while you are deployed overseas.

    Our preferred lender, Bill Horrell at Alpha Mortgage, can answer any questions you have about VA home loans and get you prequalified to begin your home search today! Call him at (910) 352-1512 or email at bill.horrell@alphamortgage.com.



    Sources: http://www.blogs.va.gov/VAntage/19931/va-busts-four-home-loan-myths-that-hurt-veteran-homebuyers/, http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp, http://www.military.com/money/va-loans/5-va-loan-myths-dispelled.html,


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