VA home loans have been helping veterans, service members, and eligible surviving spouses achieve the dream of homeownership since 1944. However, despite the many benefits of this program, there are still several common misconceptions surrounding VA home loans. This article will explore some of these misconceptions and provide the truth behind them.
Misconception #1: VA loans are only for first-time homebuyers
Truth: There is no restriction on how many times you can use a VA loan. You can use a VA loan to buy a home for the first or fifth time. However, it would be best if you met the loan eligibility criteria, including being a veteran, service member, or eligible surviving spouse.
Misconception #2: VA loans take a long time to close
Truth: VA loans can close faster than conventional loans. The VA has strict requirements for lenders participating in the program, including the timely processing of loan applications. The VA appraisal process can also be completed in as little as ten days. Overall, the VA loan process can take just as long as a conventional loan, if not shorter.
Misconception #3: VA loans have higher interest rates than conventional loans
Truth: VA loans often have lower interest rates than conventional loans. The VA does not set interest rates, but it does regulate the fees that lenders can charge. This helps keep the overall cost of the loan lower for borrowers. Additionally, VA loans do not require mortgage insurance, which can further reduce the loan cost.
Misconception #4: VA loans have high closing costs
Truth: VA loans have a cap on the number of closing costs that a borrower can pay. Additionally, the VA allows sellers to contribute up to 4% of the purchase price toward the borrower’s closing costs. This can significantly reduce the amount the borrower must pay out of pocket at closing.
Misconception #5: VA loans can only be used to buy a single-family home
Truth: VA loans can be used to buy various properties, including single-family homes, condominiums, townhouses, and even multi-unit properties. However, the property must meet specific requirements, such as being move-in ready and meeting certain safety standards.
Misconception #6: VA loans are difficult to qualify for
Truth: VA loans have more relaxed credit requirements than conventional loans. While a credit score of 620 is typically required for conventional loans, borrowers with a credit score as low as 580 can qualify for a VA loan. Additionally, the VA has no specific debt-to-income ratio requirement, although lenders may have their guidelines.
Misconception #7: VA loans are only available to combat veterans
Truth: VA loans are available to all eligible veterans, regardless of their military service history. This includes veterans who served during peacetime and those not in combat.
Misconception #8: VA loans can only be used for primary residences
Truth: VA loans can be used to buy primary residences, vacation homes, and investment properties. However, there are certain restrictions on the use of the loan for investment properties, such as requiring the borrower to occupy one of the units in a multi-unit property.
Misconception #9: VA loans require a down payment
Truth: VA loans do not require a down payment for qualified borrowers. This can be a significant advantage for borrowers with little cash for a down payment.
Misconception #10: VA loans are not a good choice for refinancing
Truth: VA loans can be an excellent option for refinancing, especially if the borrower is looking to lower their interest rate or monthly mortgage payment. VA loans can also be used to refinance a non-VA loan into a VA loan, providing additional benefits such as no mortgage insurance and a higher loan-to-value ratio. Refinancing with a VA loan can also allow borrowers to access their home equity for home improvements or debt consolidation.
Overall, VA loans are a versatile and valuable tool for achieving homeownership and financial stability for eligible veterans, service members, and surviving spouses. More borrowers can take advantage of VA loan benefits by dispelling these common misconceptions.