A VA home loan is a $0-down mortgage option that is issued by private lenders and partially backed by the Department of Veterans Affairs (VA). Since the program’s inception in 1944, the VA has backed the funding of more than 22 million home loans, enabling millions of Veterans to become homeowners. However, the requirements and process behind a VA loan are a bit different from that of a conventional loan. Despite generations of historic success, several myths and misconceptions deter Veterans from reaping its rewards. Let’s debunk some of these myths so that you can properly decide whether a VA loan is the best fit for your financial situation.
#1: You can only have one VA loan at a time.
Once you earn this benefit, it’s yours for life. Not only can qualified Veterans apply for multiple VA loans over the course of their lifetime, but they can also apply for multiple loans at one time. The only change that you will experience if you take out multiple VA loans at once will be the amount of down payment required for your sequential loans.
#2: You can only borrow up to a certain loan limit.
That used to be true, but is no longer the case unless you have multiple VA home loans at one time. Mortgage lenders like CMG Mortgage will allow you to borrow up to $5 million on a VA home loan with $0-down payment regardless of your county’s loan limit as long as you do not have multiple VA loans outstanding at the same time. Of course, every VA borrower must demonstrate they can qualify and meet all VA lending guidelines.
#3: You can only refinance into a VA home loan if you already have one.
If you are eligible, then you can refinance into a VA loan from any other loan type. They can be used to refinance your current home loan — up to 100% of the home’s value in some cases — and will give you access to all of the program’s great benefits.
#4: VA loans are harder to get approved and less likely to close.
In some cases, it’s actually easier to qualify for a VA loan than a conventional loan. The VA loan tends to have more lenient requirements when it comes to income, debt-to-income ratios, loan-to-value requirements, credit history, etc. Lenders tend to look for a certain credit score, but technically the VA loan does not have a minimum credit score requirement. Veterans and active military are also permitted to finance a home sooner after a bankruptcy, foreclosure or short sale.
According to a study conducted by Ellie Mae, 70 percent of VA loan applications went on to close, which was the highest percentile out of all the loan programs studied (conventional, FHA, VA, etc.).
#5: Sellers are less likely to accept a VA loan buyer’s offer.
This myth often stems from the misconception that the seller has to pay many of the buyer’s closing fees and is therefore less likely to accept their offer. That is not true! Typically, the seller is only required to pay for a termite report. Any other costs, such as the buyer’s closing costs, are not the seller’s financial responsibility in most cases.
As with all loan types, there are several factors that are used to determine which ones are best for you. However, if you’re a veteran or active military and your lender isn’t looking into a VA loan for your home purchase, then you might be missing out. Research your options and consult with a home loan professional before making a final decision regarding your home loan.