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Busting the Top 11 VA Loan Myths

There’s a lot of false information about VA loans. We often talk with people who have misconceptions about these loans, so we’d like to help by shedding light on a few common VA loan myths.

Top 11 Myths of VA Loans 

Myth #1: They are Only Available for Combat Veterans

Because these loans are guaranteed by the Department of Veterans Affairs, many people mistakenly assume they are only for combat veterans. The truth is much different, as these loans are available for active service members, reservists, National Guard members, as well as Academy cadets and midshipmen. They are even available for spouses of veterans, as well as NOAA officers and Public Health Service officers. For a complete summary on eligibility, use this helpful guide provided by the VA.

Myth #2: The Interest Rates are High

These loans often come with looser restrictions (once you are eligible), such as lower down payment requirements and easier terms. For this reason, you might assume that interest rates are higher in order to compensate. This is simply not the case, as VA loans usually have interest rates that are at or below the current typical rates. Depending on your situation, the specific rates for your loan could be above average, but VA loans interest rates generally align with other loan options.

Myth #3: They Are Only for First-Time Homebuyers

Some government-supported programs are only for first-time homebuyers. This is not the case with VA loans. VA loans are intended to enhance homeownership among veterans, so whether you have never owned a home or have owned ten, these loans are available as long as it’s your primary residence. You generally can’t have multiple VA loans at once, but you can use VA loans to, for example, purchase your starter home, then upgrade to a larger house, then purchase a retirement property.

Myth #4: VA Loans Have Hidden Costs that Make them Unaffordable

Somehow VA loans received a poor reputation for hidden costs and fees that make them less affordable than they seem. This is simply not the case. In fact, with no mortgage insurance and no down payment, the out-of-pocket costs are usually much less. With a Good Faith Estimate provided by a quality lending agent, there should be no unexpected costs for these loans, although there may be closing fees, VA funding fees, and appraisal fees.

Myth #5: VA Loans Require a Stellar Credit History

No matter the branch, you deserve to use all your benefits, including VA loans.

With light interest rates and no down payment, the next logical assumption is that VA loans require a virtually flawless credit history. This is simply not the case, as the loans can generally be acquired with decent or even low credit. VA loans may even be available after a foreclosure or bankruptcy.

Myth #6: VA Loans are Difficult, Time-Consuming, and Complex

VA loans involve the government, so naturally there can be a lot of bureaucratic red tape. However, this is a bit overblown with VA loans. These loans are administered by individual lenders, so an experienced agent can expedite the process. The loans may be less efficient than other options, but they are not difficult or time consuming, at least compared to their reputation.

Myth #7: They Are Only for Purchasing a Single-Family House

This is also an untrue myth that gets tossed around about VA loans. Some people think that you can only use the financing to purchase a single-standing house on an individual property, but it can actually be used to make a variety of purchases. For example, you can use the loans to buy a condominium in an approved building or a multi-family property with up to four units (which can help enhance your monthly income). It can also be used to purchase a home and make renovations such as repairs and energy-efficiency upgrades, which makes fixer-uppers available with VA loans. You can even use the funding to purchase an empty lot and build your dream home. Refinancing and cash-out refinancing are available as well. Clearly there are more options with these loans than just purchasing a typical house!

Myth #8: The Loans are Guaranteed to VA Members

If you are eligible for VA benefits, you qualify to apply for a VA loan, but you may not be approved. There are still credit and income requirements, so not all service members will automatically be approved for a loan. Unfortunately, you still have to go through the approval process, which can result in rejection of your application.

Myth #9: Short-Sale and Foreclosure Properties are Off Limits

As long as the property in question meets the specific requirements of the VA, short-sale and foreclosure homes are eligible for purchase. These homes allow you to find affordable housing, and they could be a good choice if you are having trouble finding a good home that is within your budget. However, you should be aware of the potential risks associated with purchasing a foreclosure.

Myth #10: VA Loans are Only for Low-Market Properties

VA loans have their limits, but that doesn’t mean you can only buy low-priced, bottom-market housing with these loans. In fact, the VA itself does not set a cap on how much you can borrow, but they will set a cap on how much they will insure, which will, in most cases, impact how much the lender allows you to borrow.

Details aside, the insurance limits for VA loan limits are the same as the FHFA loan limits, which are set by county. For 2019 in San Diego County, you can borrow up to $690,000 for a single-family home. In any part of the country, you can borrow at least $484,350, which should make most homes available.

Myth #11: Occupancy Rules are Highly Restricting for Active Duty Vets

If you are an active service member, you might assume that the occupancy rules for these loans will keep you from using the option. However, service members on active duty can receive a 12-month extension on their occupancy rules, and spouses or dependents can also help fulfill occupancy requirements. Basically, there are ways around this potential hangup.

Providing Expert Assistance for VA Loans

With a dedication to support and commonsense underwriting, we can help you find the right loan for your specific needs. Contact our staff for more information on available mortgage loan options.