Veterans have the chance to secure 100% financing for their home loan using their VA benefit. The loan program is flexible and able to provide you with the chance to buy a home. Unfortunately, the VA loan is also one of the most misunderstood loans on both the buyer and seller’s side. Keep reading to learn the top misconceptions of the VA loan.
Myth: VA loans take forever to close.
Many sellers believe this myth, which makes it hard for veterans to find a home. Sellers that are in a hurry and want to sell their home won’t take a chance on VA financing. The truth is that VA loans don’t take any longer to underwrite than any other loan program. The VA themselves don’t even get involved in the underwriting. Only the VA-approved lender does the underwriting, which takes the same time as say an FHA or conventional loan.
Myth: The VA appraisal is impossible to pass.
The VA appraisal is only slightly different than appraisals for other loan programs. The VA has a list of Minimum Property Requirements the home must have in order to pass. This list is nothing out of the ordinary, though, and are likely things that any lender would want when providing financing.
The VA’s goal is to make sure that the home is safe, sound, and sanitary. In other words, they want to make sure the veteran isn’t investing his/her money in a home that will become a money pit, rendering their investment useless.
Myth: You are limited in the price you can pay for a home.
This is only partially true. Yes, the VA limits your benefits to the current maximum conforming limit, but that doesn’t mean you can’t borrow more money for a home. The VA limits the amount of the loan that they will guaranty. All this means is that the lender will require a down payment on any loan amount that exceeds what the VA will guaranty.
If you have full entitlement, the VA will guaranty a loan amount up to $484,350. If you don’t have full entitlement for one reason or another, they will guaranty up to the amount of the entitlement that you have. If you want to buy a home that exceeds the amount of your entitlement, you’ll need a down payment equal to 25% of the difference between the entitlement and the purchase price.
Myth: You can’t buy a foreclosed property with a VA loan.
You can buy any type of property that will pass the VA appraisal with the VA loan. This includes foreclosed properties. The problem that often comes up with foreclosed properties, though, is the condition of the home. Yes, the VA appraisal must show that the home is ready to be lived in safely. If the home was abandoned and not cared for recently, then it could be difficult to use VA financing to purchase it, but if it’s in good condition, you may be able to use your VA benefit.
Myth: You must be in the regular military to get a VA loan.
Any military veteran that served the appropriate amount of time may be eligible for a VA loan. While regular military veterans have the least amount of service requirements in order to qualify, many veterans do qualify. You must serve the following in order to get entitlement:
- 90 days in the regular military during wartime
- 181 days in the regular military during peacetime
- 6 years in the National Guard or Reserves
In addition to the service time, you must prove that you had an honorable discharge. In some cases, even a general discharge will work; it’s just the less than honorable discharges that won’t leave you with any VA benefits.
Myth: Retired veterans or surviving spouses can’t use the VA benefit.
VA benefits never expire. If you retired, you can still use your VA benefit. If your veteran spouse died while on active duty or as a result of something that happened while on active duty, the surviving widow can use the VA Benefits.
The biggest issue with retirees and surviving widows is proving the income to prove they can afford the loan. The VA will provide the benefit as long as the applicant, whether retiree or surviving widow, can prove that they have enough income to keep their debt ratio below 43% and their disposable income high enough to cover the cost of daily living.
Don’t let the misconceptions of the VA loan keep you from using your VA benefit. You have the opportunity to secure 100% financing for your home, allowing you to become a homeowner faster than any other loan program. Talk with several lenders to see which VA-approved lender has the best interest rates, terms, and closing costs to help you get the most out of your VA home loan benefit.