Debunking Myths About VA Loans
You can trust a physician that other doctors use for themselves. So, too, can you trust residential loan products that professionals in the mortgage industry utilize.
Kelly Smith, a mortgage senior loan officer with TowneBank Mortgage, and her military veteran husband, Michael, have a VA loan, and they both love the benefits of this underappreciated product. In fact, throughout his military career, Michael has depended on six VA loans to obtain housing.
“I absolutely love VA loans,” said Smith, who has almost two decades as a VA loan specialist.
Smith believes the time is ripe for VA loans to get the respect they deserve.
“There are a lot of misconceptions, but it’s a great benefit,” she said.
Like Smith, Palm Bay real estate agent Paula Zima with RE/MAX Elite is a huge fan of VA loans — both have utilized the loans themselves. Zima feels agents are doing both sellers and buyers a disservice by steering them away from these loans.
“Sellers and Realtors have the impression that they’re a risky loan because they are 100% financing, but these loans are not risky for them at all,” she said. “VA loans are near and dear to my heart.”
Zima has made it her mission to educate fellow agents, and sellers, too, on the loans. For active member of the military Leigh Salisbury, VA loans made purchasing the home of her dreams a breeze to get. Recently assigned to Patrick Space Force Base from Germany, Salisbury purchased a “for sale by owner” home in Satellite Beach from a seller who was happy to help a member of the Air Force, because they themselves had served. It was Salisbury’s second VA loan.
“It was worth it 100 percent, because my interest rate was much lower,” Salisbury said.
Since the Veterans’ Administration loan program started in 1944, more than 22 million home loans have enabled active and retired military to purchase their dream home with extremely favorable rates. But apocryphal horror stories abound about these loans — misconceptions often promulgated by real estate agents inexperienced with these types of loans. It is time to quash those myths.
True or false?
- Only combat veterans are eligible.
False. Honorably discharged veterans, reservists, active-duty service members, surviving spouses, National Guard members, Academy cadets or midshipmen, NOOA officers and Public Health Service officers may all be eligible for a VA loan, according to the U.S. Department of Veterans Affairs.
- VA loans take longer to process.
False. With the help of a lender familiar with the product, closing with most VA loans is not longer than a close with conventional or FHA loans.
“A VA loan can close just as fast,” Smith said.
- Qualification is harder to meet with VA loans.
False. Actually, in some cases, these loans are easier, since they carry less stringent guidelines and accept slightly lower credit scores than conventional loans.
“They also allow for a higher debt-to-income ratio,” Smith said.
- You need a high down payment with a VA loan
False. If you think a zero — as in no — down payment is too high, then VA loans are not for you, because these loans allow you to purchase a home with no down payment.
- You can only have one VA loan in your lifetime
False. Kelly Smith will tell you that her family has used this loan vehicle multiple times and loved it. There is no limit to the number of times a buyer can be accepted for a VA loan. In fact, you can have two VA loans at once, as long as they are for the primary residence, and not a second home. For example, If VA benefits were used to purchase a home now being rented, the owner can apply the remainder of eligibility for a second VA home loan.
- You can’t build a house or refinance an existing one using a VA loan.
False. VA loans can be used for both new construction and for refinancing, up to 100 percent of the home’s value.
“Builders don’t have an issue with VA loans, because they understand the difference,” Zima said.
- VA loans are so small, they can only be used for starter homes.
False. While VA loans can jumpstart a buyer into first-time homeownership, they are also available for homes well north of $1 million.
One of Zima’s buyers purchased a home at more than $1 million and opted for a VA loan.
“He didn’t have to use a VA loan, but he chose to because it is a benefit he earned,” she said.
- VA loans require mortgage insurance.
False. “There is no required monthly mortgage insurance,” Smith said.
- Rates for VA loans are not competitive.
False. Au contraire, VA loan rates not only are highly competitive, but are lower.
- VA home loan appraisals and inspections are bears.
False. The Veterans Administration is not in the business of appraising or inspecting houses. Instead, a VA-approved appraiser determines the value for the house under consideration. Home inspections are always a good part of due diligence when purchasing property, but that is the buyer’s responsibility.
- VA loans cost sellers more in fees.
False. It may have been true 20 years ago that VA loans carried seller fees, but that is no longer the case.
“A termite inspection is the only fee that sellers have the option to pay for the buyer,” Zima said.
For more on VA loans, visit benefits.va.gov