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5 Common Misconceptions About The VA Home Loan

Written by Posted On Wednesday, 27 December 2017 08:21

 

1. Myth: You need a 620 credit score to qualify for a VA loan.

 

Fact: The VA doesn't require a specific score to qualify for a VA home loan guarantee. Ultimately, it's the lender you choose who sets the underwriting criteria for the actual mortgage used to purchase your home. With that said, if you are interested in buying a home but have a lower credit score - shop around. Ask different lenders for their minimum underwriting criteria. While it’s true that some lenders do have a more risk-averse financing model, you’ll find that some don't.

 

EXTRA ADVICE: If your credit score precludes your approval with a specific lender, don’t give up! Ask your real estate professional which lenders they know that have more relaxed underwriting criteria. There are great odds that your real estate professional will know which lender can best provide services tailored to your specific needs.


2. Myth: The VA Home Loan is a one-time benefit.

 

Fact: Once you earn this, you are entitled to it for life. Thankfully, there is a simple process called 'restoration of entitlement'. Should you sell your home or pay off your VA Home Loan, you can then use that previously used entitlement AGAIN. Adding to this, it's not uncommon for people to own multiple homes; each of which having been acquired with a VA Home Loan.

 

EXTRA ADVICE: The 2018 VA Home Loan limit increased to $453,100 in 2018. (unless you are buying in a ‘high-cost’ county, where they are higher). Without regard to ‘restoration of entitlement’, you may still spread your entitlement amount between multiple properties simultaneously. If you buy at one duty-station and then PCS, you may still qualify to use any remaining entitlement at your new duty-station; still owning (and renting out) your previous residence. Caveat: Your credit must still meet your chosen lender’s underwriting requirements.


3. Myth: VA Loans can only be used to acquire single-family homes.

 

Fact: VA Loans can be used to acquire one, two, three or four-unit properties, so long as the qualifying veteran intends to occupy one of the units. How does it sound to have someone else paying your mortgage? Thanks to conforming mortgage standards - it's completely possible to use a VA Home Loan to buy (or build) a four-unit building, live in one of the units and lease the other three!

 

EXTRA ADVICE: Owning multi-family real estate is a great way to invest in your future, beyond being a homeowner. Investing in four conjoined townhomes is similar to investing in four houses, only less maintenance. If you only manage to pay your minimum mortgage payment each month, in 30 years you'll have paid off FOUR homes as opposed to just one. Meanwhile, you managed to cash-flow the excess rent (profit) from your tenants the entire time.

4. VA Home Loans require a down payment.

 

Fact: Most VA Home Loans do not require a down-payment. The only two exceptions to this are if the purchase price exceeds the reasonable value of the subject property, or the loan is a Graduated Payment Mortgage (GPM). While it's a common thought among veterans that this opportunity is 'too good to be true', we must remember that the VA is guaranteeing up to 25% of the mortgage from loss. With that VA guarantee, lenders are able to comfortably lend 100% on a home, knowing they've already mitigated most of the risk.

 

5. Myth: VA Loans take a long time to close.

 

Fact: VA Home Loans close as fast as the other types. They are also more likely to close than both conventional and FHA loans under the same conditions. The only problem that may exist with time-to-close estimates on VA home loans is the experience of their real estate professional. If your chosen real estate professional has considerable experience with military and Veteran clients, then the process as a buyer should seem indistinguishable from FHA or conventional financing. Yes, the VA Home Loan process is slightly different. If you are buying a home in an area where VA Home Loans are not common, then it's not likely that your real estate professional will be as versed in the process. This lack of familiarity by your real estate professional will ultimatly result in a slower home buying process.  

 

EXTRA ADVICE: If you are using a VA Home Loan, choose a real estate agent who has significant experience with military and Veteran clients. It's likely they will know the VA Home Loan process thouroughly, being best suited to give you prudent guidance along the way.

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Dustin Lyle is a real estate writer, keynote speaker, investor and coach who lives in Nashville, Tennessee. He currently serves as Partner at The Lyle Home Group LLP. Contact Dustin at Dustin@LyleHomeGroup.com.

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