10 Myths about VA Loans that Aren't True

Many people have heard rumors about VA loans – that they are difficult to qualify for, that you need a perfect credit score to get approved, or that they come with lots of hidden fees and other costs.

There are various myths surrounding this government-backed loan program. Unfortunately, some of them are outright lies. Fortunately, it's simple to dispel these popular misconceptions when you have the facts. Since its creation in 1944, the VA has issued more than 22 million mortgage loans to Veterans, allowing millions of Americans to live the American Dream of homeownership. Mortgage lenders are also very familiar with the VA loan program, making it easier to apply for than a conventional or FHA loan. In addition, many lenders will automatically place VA loans at the top of their list for approval.

So it's time to separate the actual events from the exaggerated ones. A closer look may help you figure out what you do and don't know about VA loans.

Myths About VA Loans That Aren't True

Myth #1: To Be Approved, You Must Have Perfect Credit

False. While the Department of Veterans Affairs encourages lenders to extend VA home loans to all qualified applicants, it does not stipulate a minimum credit score. Each lender has its credit standards to ensure that borrowers are suitable for the loan. Lenders are expected to exercise good judgment and flexibility when applying the VA's underwriting criteria for credit, debit, and income. To apply for a VA loan, you must have a credit score of at least 620.

Myth #2: Only Combat Veterans Are Eligible

That is an entirely false statement. Veterans, active-duty soldiers, reservists, and National Guard members can qualify for home loan perks. You may be eligible if you are:

• A veteran of the military
• Active-duty service member
• Reservist or National Guard member
• Certain surviving spouses
• Academy cadets or midshipmen
• PHS officer

Myth #3: You Can Only Utilize The VA Home Loan Benefit Once

This is not true. You can utilize your VA home loan benefit multiple times. It's a popular option among Veterans because it works for their house financing needs. You can use it to buy a house as a starter and then expand to a more extensive property for your expanding family. And you can use it again to refinance your home to get cash out or other purposes. A VA loan can be a fantastic mortgage option for all phases of life if you have enough entitlement to back your loan.

Myth #4: The VA Appraisal is Taking Too Long

That's not true. VA appraisals shouldn't take longer than comparable home loans. Once you have signed the purchase agreement, your lender will request that the VA appraiser inspects and values the property. This step is necessary because the VA loan guarantee only protects the lender if the home is worth at least the loan amount. The appraiser will also look for necessary repairs that must be made before the loan can close. The entire process shouldn't take more than a few weeks.

Myth #5: VA Loans Have Unexpected Out-of-Pocket Costs

It's not correct. VA loans are well-known for their advantages, such as no private mortgage insurance (PMI) or even zero down payments. In addition, the VA guarantees a part of the loan that allows you to get 100% financing on your purchase. Plus, some lenders will offer competitive interest rates and reasonable closing costs. Remember that every lender has different fee structures, so it's best to shop around for the best deal.

Myth #6: Too Much Government Red Tape Exists on VA Loans

This is not the reality. The Department of VA has worked hard to streamline and speed up the loan process for Veterans. The VA's Loan Guaranty Service is in place to help Veterans get through the home loan process as quickly and smoothly as possible. In addition, the department's lenders, who are highly experienced in home loans for Veterans, will also aid you in getting to the closing table each step of the way.

Myth #7: You're Limited As Far As What You Can Do With Your VA Home Loan Benefits

THE REALITY: Many people believe that VA loans are only for purchasing single-family properties. But just look at all the various ways to make use of your VA home loan perks:

• Purchase a single-family house.
• Purchase a condominium unit in a VA-approved development.
• Build a home.
• Purchase a manufactured home or lot.
• Make energy-efficient improvements to your home.
• Buy a duplex, three-unit, or four-unit home.
• Rent out the property to other renters.

Myth #8: VA Loans Have Higher Interest Rates

False. VA loan rates are generally lower than competitive rates on conventional loans. For example, the average interest rate on a 30-year fixed VA loan was 3.99% in 2020, while the average rate on a 30-year fixed conventional loan was 4.39%.

VA rates are so competitive because the VA backs a portion of each loan, which helps lenders lower their risk and keep rates low. However, remember that every lender has different fee structures, so it's best to shop around for the best deal.

Myth #9: Many Veterans Do Not Qualify for VA Loans

The real answer is "no." The majority of US veterans are eligible for VA loans. As long as you served on active duty for at least 90 days and were honorably discharged, you can use your VA loan benefits. That includes Guard and Reserve members who were called to active duty, provided they served at least six years in the military.

You may be allowed for a VA loan if you are a surviving spouse of a Veteran who died in service or owing to an injury incurred during service.

Myth #10: VA Occupancy Rule Is Too Hard For Active Duty Serving Overseas

This is not the reality. The VA occupancy rule simply states that you must move into the home within 60 days of closing on your loan. If you're an active-duty service member deployed overseas, you can provide a copy of your deployment orders to extend the occupancy rule to 12 months.

If your home purchase is delayed, you'll need to provide a copy of the contract and proof that you've made all required payments.

Conclusion

VA loans are an excellent way for eligible Veterans to finance a home purchase. There are many myths about VA loans, but the reality is that they offer several advantages, such as low-interest rates. In addition, the VA has worked hard to streamline and speed up the loan process for Veterans, making it easier than ever to get approved for a home loan. So if you're an eligible Veteran, don't hesitate to take advantage of your VA home loan benefits today.