Are you a veteran that is eligible for VA benefits? You might balk at the idea because of the myths that surround VA loans. Many of these myths stop veterans from taking out a VA loan, which is a shame because the VA loan offers
100% financing with flexible guidelines.
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We have gathered the most common myths that people fall for to help you avoid falling for them too.
Myth: The VA loan takes too long to close.
Many people swear that the VA loan takes months to close. In all honesty, it takes just as long to close a VA loan as it does any other loan. Because you go through the lender, not the VA, the lender is in control of how long it takes. The timeline actually depends on the lender’s workload, their general process, and how well you respond to the lender’s needs throughout the process.
The VA actually doesn’t even look at your loan during this process.
Myth: It’s impossible to get through the VA appraisal process.
The VA appraisal helps borrowers understand if the home is in stable, sanitary, and livable condition. While it may have a few extra points that standard loan appraisals don’t need, it’s nothing to make you run the other way. If anything, the VA appraisal helps you know if the home is a good deal or not. Do you really want to buy a home if it’s not safe, stable, and sanitary?
The VA does have what they call
Minimum Property Requirements. These requirements may make the VA appraisal seem tougher, but it’s really just a checklist to make sure the appraiser hits all of the important points. The VA loan isn’t for fixer-uppers, so if that was your thought, you will have to look elsewhere. If you are buying a standard home, though, it’s a great way to make sure the home is in good condition.
Myth: All veterans qualify for a VA loan.
There’s a difference between eligible and qualify. As a veteran with at least 90 days served during wartime or 181 days during peacetime, you are eligible for a VA loan. This means the bank can process your loan. But, it doesn’t mean that you qualify for the loan. You have to prove to the lender that you have the credit and income to afford the loan.
The VA does have flexible qualifying guidelines, but you still have to qualify for the loan. Their basic guidelines require:
- 620 credit score
- 43% total debt ratio
- Stable employment and income
- Enough disposable income to meet the VA guidelines for your family size and location
- Proof that you will occupy the property
If you meet these requirements, yes you do qualify for a VA loan. If you don’t, though, even though you are a veteran, you will not qualify for a VA loan.
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Myth: You can only use the VA benefit one time.
The truth is that you can use the VA benefit repeatedly. What you must do, though, is pay the loan off in full and sell the house. You can then ask the VA to re-establish your VA benefits. This gives you the chance to reuse them on another home.
There is a one-time exception to this rule as well. If you bought a home with your VA benefits, but are then transferred to another location whether for the military or your civilian job, you may be able to keep the original home. If you want to rent it out and move back to in somewhere down the line, you can petition for the one-time exception. This allows you to use your remaining entitlement (entitlement you didn’t use) and buy another home.
You can only use the exception rule one time. After that, you will have to abide by the standard VA rule that requires you to pay off the loan and sell the home.
Myth: VA loans carry higher interest rates.
Actually, VA loans often have lower interest rates than even conventional loans offer. This is due to the guaranty that the VA provides. They promise the VA approved lender that they will pay them 25% of the defaulted amount on a loan, should it get to that point. Because of this large guaranty, many lenders can afford to give veterans very attractive interest rates.
Of course, your
interest rates are determined by your actually qualifying factors. How much risk of default do you pose? Is your credit score low and your debt ratio high? If so, you’ll have a higher interest rate no matter what type of loan you choose. If your credit score is high and your debt ratio low, though, you may get a lower interest rate.
Myth: VA loans require a lot of out of pocket expenses.
This too is false. In fact, the VA greatly monitors what veterans can pay and limits it much more than any other program. The VA doesn’t charge mortgage insurance and their closing fees are usually pretty standard for the area.
The one fee you do have to pay is the VA funding fee. If you are a member of the regular military, this fee is 2.15% of your loan amount. Considering that you don’t need to put any money down on the home and you get flexible guidelines, though, that 2.15% won’t seem like much after all.
The VA loan is a great way to get into the home you want without paying a lot of money out of pocket. You can put nothing down on the home, secure a good interest rate, and pay low closing costs. If you are worried about the length of time it takes to approve the loan, make sure you shop around and find the lender with the best turnaround time to make the most of the situation.
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