VA Home Loans: Myth vs Reality
We hear a lot about Veterans Affairs (VA) Loans that just isn’t true — Some of it from lending professionals who should know better. Listed below are some common VA financing myths along with a brief explanation of the reality.
M: Only the United States Department of Veterans Affairs (VA) can make VA loans.
Reality: The Department of Veterans Affairs does not make loans, they only guarantee a portion of a loan funded by an approved mortgage lender. The VA home loan guarantee allows a lender to recover some of their losses in the event of a foreclosure. Since there’s less risk for a lender, a VA home loan often has more-relaxed underwriting requirements.
M: Certain lenders have “preferred” relationships with the VA, allowing them to offer lower interest rates than other lenders.
Reality: All lenders who arrange and fund VA loans are supervised and must be approved by the Department of Veterans Affairs. The VA does not have “preferred lenders.” Unfortunately, some companies engage in direct mail practices that make it appear as though they get preferential treatment — They don’t.
M: Special VA “no fee” loans can be obtained through “VA affiliated” lenders.
Reality: All mortgage loans have associated fees, and VA loans are no different. VA loans have a “funding fee” that can be financed into the loan. Disabled veterans are exempt from paying this funding fee. A trusted lender can help vets sort through and understand what closing costs are associated with their loan and how those fees can be covered. Also, there’s no such thing as a “VA affiliated” lender.
M: The VA frequently uses direct mail to contact veterans and their families with special home loan offers.
Reality: The VA does not send mailers directly to veterans soliciting loans. Any direct mail loan offers received by vets are sent by lenders — Regardless of how “official” the mail is made to look.
M: VA loans don’t require the same scrutiny or disclosures that ordinary mortgages do.
Reality: This idea is false. Because VA loans are underwritten and funded by lenders, they require the same scrutiny and underwriting process as other mortgages. Many lenders have been fined over false statements, falsely-disclosed interest rates, and deceptive advertising regarding VA loans. All veterans should do some in-depth research when choosing a lender. The best place to learn about VA loans is to start on the VA website: www.va.gov/housing-assistance/home-loans
M: VA loans take a long time.
Reality: VA loans do not take any longer to close than any other type of home financing. In fact, we often close VA loans in less than 30 days.
M: The seller has to pay all the closing costs in a purchase.
Reality: There are some closing costs the veteran cannot pay, however these costs can be paid through a credit from the lender. This allows a veteran to present a competitive purchase offer.
M: VA property appraisals take a long, long time.
Reality: A VA appraiser is required to have the completed appraisal to a lender in just 10 days.
M: A property has to be perfect to qualify for VA financing.
Reality: A property must comply with minimum standards to qualify for VA financing. Most issues can be addressed with the pest clearance (required) and a septic clearance (if applicable).
M: You have to be a veteran to qualify for a VA home loan.
Reality: Surviving spouses of deceased vets who have not remarried can use a VA loan for purchase or refinance. It’s also helpful to know veterans on active duty also qualify.
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We are here to answer any questions about VA home loan financing and work with you on your scenarios.