4 VA Home Loan Myths You Need To Be Aware Of
Veterans have risked everything to protect and defend everything on American soil. It’s understandable that they would want to have a small piece they can call their own.
The VA home loan program helps veterans, active service members, and their surviving spouses realize the American dream of owning a house. Unfortunately, a third of veterans don’t even realize this benefit exists. Many of the veterans that do know about the program don’t fully understand how it works. Like most lending programs, VA loans can be complex even for people working within the mortgage industry. Misunderstandings have led to a number of myths over the years, some of which hold veterans back from home buying.
Below is an overview of four common home loan myths, and the truth behind the misconceptions.
Myth #1: “A VA Loan can only be used once…”
One of the most common misconceptions about the VA loan program is that a qualified veteran or servicemember can only use a VA loan once. Typically, an eligible borrower will only have one VA loan at a time, but even that isn’t always the case.
VA loans are a lifetime benefit. They can be used repeatedly based on the amount of entitlement that is available. Whenever a current VA loan is assumed or paid off, the veteran’s basic entitlement can be fully restored for the next loan.
Myth #2: “A Veteran borrower needs perfect credit to qualify…”
While a high credit score can help improve the loan terms and limit, it’s not always necessary for a VA loan approval. Because the Department of Veterans Affairs guarantees a portion of the loan, lenders are more willing to approve veterans for a home loan even if they don’t have a perfect credit score.
VA loans are much more financially lenient than conventional loans in many regards. The minimum credit score for most conventional loans is 660, whereas VA lenders will often accept fair scores of 620 or better.
Myth #3: “A foreclosure or bankruptcy prevents Veterans from getting a VA Loan…”
Having a foreclosure or bankruptcy on your record can be a challenge, but it doesn’t prevent a person from getting a VA loan.
Waiting Periods for Conventional Loans:
- 3 years after foreclosure
- 2 years after bankruptcy
Waiting Periods for VA loans:
- 2 years after foreclosure
- 2 years after Chapter 7 bankruptcy
- 1 year after Chapter 13 bankruptcy that’s being paid
All borrowers can improve their chances of loan approval after a foreclosure or bankruptcy by taking steps to get their finances back on track. Focus should be put on rebuilding your credit score and making sure all payments are made on time every month.
On a related note, another less common myth is that VA loans can’t be used to purchase short sale or foreclosed home. A VA home loan can be used in both of these situations; however, stipulations regarding what the buyer can and can’t pay for may cause hang-ups or additional expenses.
Myth #4: “VA Loans take longer to close…”
Recent reports completely dispel this myth. In fact, on average VA loans close almost as quickly as other types of home loans. In April, the National Association of Realtors reported the following:
- Purchase and refinance loans take 44 days on average.
- Purchase loans take 45 days to close on average.
- FHA loans take 45 days to close on average.
- VA loans take 48 days to close on average.
Some reports have also noted that VA loans take only a day longer to close than conventional loans. A few extra days doesn’t make much of a difference, and a lender that specializes in VA loans can speed up the process. The likelihood of actually making it to close is much more important than the time it takes. Here VA loans have a slight advantage. Last year Ellie Mae reported that 70 percent of VA loans closed over a 90-day period compared to 67 percent of conventional loans.
If you are interested in using a VA loan to purchase a home, the experts at Intercap Lending Inc. can help. We’re a VA-approved lender that can handle every aspect of the loan. Call us today to speak with a loan officer about your options!