The VA home loan program has been around since WWII. Yet somehow, many of our veterans and servicemembers still don’t take advantage of this benefit when they’re ready to purchase a home.
Maybe you don’t really understand how a VA loan works. Or maybe you’ve heard some things about it that make you uneasy. There are certainly a lot of myths out there about the VA house loan, and our goal is to dispel that misinformation.
Myth #1: You Must Have PERFECT Finances to Qualify for a VA Home Loan
There are a couple variations on this myth:
- “You need a perfect credit score to get a VA loan!”
- “I could never get a VA loan because I foreclosed on my last house.”
- “I filed for bankruptcy, so a VA loan isn’t an option.”
NONE of these, however, are true!
The Myth of Perfect Credit
Let’s tackle this one first, shall we? For starters, the VA loan program itself doesn’t set any minimum requirements for credit. There are, however, some lenders who choose to set their own minimums, usually around 620, which is still a far cry from perfect or even good credit.
In comparison, conventional loans usually require around a 660 as the minimum, so already VA loans are still much more accessible to a wider pool of people, at least in terms of credit score. Even more so when you consider that the average credit score for conventional loans is in the 700s.
But let’s go back to the fact that the VA doesn’t set a minimum. Like we said, some lenders do choose to set their own. But normally, when we’re not experiencing a pandemic*, at Low VA Rates we don’t have a minimum.
We’re willing to talk with every veteran and examine their credit history beyond just the numbers. If there’s a good reason for why you have a negative mark on your credit, we’re both willing and able to help make your home loan dreams a reality.
*If things have gone back to normal when you’re reading this, then please disregard. Or if you’re unsure, you can always call and speak to a loan officer.
The Myth of Foreclosure & Bankruptcy
For convenience sake, we’re going to group these two myths together because the response to each of them is very similar.
With a conventional loan, it usually takes 2-3 years after one of these events to be able to get another home loan. In contrast, with a VA home loan, you only have to wait:
- 2 years following a foreclosure
- 2 years after a Chapter 7 bankruptcy discharge
- 1 year after filing for Chapter 13
Myth #2: VA Loans Are Risky Because They Don’t Require a Down Payment
It’s true that VA loans don’t require a down payment. And we could see how that might make some people nervous, especially after the 2008 housing collapse.
But the reason why VA home loans don’t require a down payment is that the VA itself backs a portion of the loan. (In loan lingo, this is called the “VA Loan Guaranty.”)
This guaranty is given as a kind of thanks to our servicemembers for all they’ve sacrificed, and it’s one of the biggest perks of getting a VA loan for your house.
Now because the government backs a portion of each VA loan, it actually makes the loan very secure. Since the aforementioned housing crash, VA loans have actually been the most stable—despite their lack of a required down payment. (Check out this post from the VA itself for a more in-depth explanation.)
Myth #3: VA Loans Are More Expensive & Give Buyers a Disadvantage
There are a lot of myths about the closing costs for VA home loans, and many people mistakenly believe they make VA loans more expensive for buyers.
The truth, however, is that the VA actually has limits on what closing costs are even allowed to be charged, as well as how much those costs can be. For a more detailed look at these limitations, check out our blog post on allowable and non-allowable fees.
It’s also true that VA home loans have special closing costs not found in any other loan type. However, these do not make the closing costs more expensive. Just check out this comparison between conventional & VA loans, specifically the sections about closing costs.
In addition, because VA loans allow borrowers to roll almost all of their closing costs into the actual loan balance, you might not even need to pay anything upfront at closing.
Another closing-cost related myth is that because the VA limits what closing costs they can charge a veteran borrower, the seller is the one who has to pay them all. If that were the case, it could put a veteran at a disadvantage when trying to buy a home where there are lots of other offers.
Luckily, this is also not true. While you can negotiate to have the seller cover some of the closing costs, they don’t have to cover them, so using a VA loan will not put you at any disadvantage in a competitive housing market.
BONUS: Other Common VA House Loan Myths You Might Encounter
While we don’t really have the time to cover all of the myths surrounding VA loans, we want you to be prepared in case you encounter some of them as you go about your home search. That way, if you do hear them, you will already know that they aren’t true.
So, without further ado, here are 5 more VA home loan myths that people might use to convince you not to get a VA loan:
- VA loans are too small to buy the house you want
- VA loans take too long to close because of government red tape
- VA appraisals are a huge hassle that take forever
- Occupancy rules for VA home loans make it impossible for servicemembers stationed overseas
- Only combat veterans can qualify for a VA house loan
Don’t be fooled by any of these false claims! If you ever have any questions about why these are myths, give one of our experts a call. At Low VA Rates, we’ll always tell you the truth, and we’re always to take the time to make sure you fully understand what your benefits are.