10 Myths About Using Your VA Loan
Our network helps hundreds of military and veterans purchase and sell homes each year. Because of this, our agents are well-versed in the VA loan which often scares many agents and lenders off. We recognize the advantage our clients have with the VA loan, however, it is very surprising to use how little our military and veterans actually understand the loan. More so, we are often shocked how little other real estate agents and even lenders know about the VA loan. Because of this, we have compiled the Top 10 Myths About VA Loans that we hear most often.
Myth #1: You can only use a VA loan once.
Truth: You can not only use a VA more than once, you can actually use it to buy another home even if you have a VA loan on another property. When you use your VA loan, the lender will assess a VA fund fee on your mortgage. The first time you use the VA loan, your funding fee will be approximately 2.15%. Each subsequent use your VA funding will be approximately 3.35%. You can use your VA loan as many times as needed as long as you have eligibility with Veteran Affairs. Your lender can pull your eligibility for you.
Myth #2: You can’t use a VA loan on more than one property at the same time.
This is a True and False statement. You cannot have more than one property on your VA certificate of Eligibility if they are in the same area. However, if you are PCSing out of an area to a new location you can use your VA loan again if:
- You qualify for both properties.
- They are not within a commuting distance of each other.
- You have enough bonus entitlement for both properties on your certificate of eligibility.
There is also another loophole if your family situation changes dramatically. For example, if you currently own a 1 bedroom, 1 bath condo, and get married and have kids, you may be able to get an exception from VA to use your VA loan again in the same area. Check with a lender that is well versed in VA loans for details.
Myth #3: You can’t rent a property out if it has a VA loan on it.
Truth: You cannot use your VA loan to purchase an investment. You must not only intend to occupy the property, but you must also move into it within a certain period of time. However, if you purchase and live in the home you can rent it if you have to. For example, you get orders to a new duty station. This can be a lifesaver for individuals who do not have enough equity to sell before they move. This is also a huge investment opportunity for our military members. If you are interested in how to start building your real estate investment portfolio with your VA loan, let us know and we can show you a strategy that is well within the limits of the VA loan rules.
Myth #4: I can buy a house with no money out of pocket.
Truth: You can potentially purchase a home with your VA loan with little to no money. Here’s the deal: VA will allow your seller to pay up to 6% of the purchase price on your behalf. However, your costs are just that, YOUR costs. You must negotiate with the seller to pay those costs. Depending on your market and the customs sellers may only pay a portion of costs or certain costs. Your agent will be able to educate you on the market you are making an offer in. Also, there are some costs you must pay upfront that the seller will not pay, or you will have to wait until closing to be reimbursed. These items would include your good faith deposit, home inspection, and appraisal. Again, your agent will be able to help you determine how much you will need up front.
Myth #5: The seller has to pay my closing costs.
Truth: Number 4 touched on this. Veteran Affairs will allow a seller to pay costs on your behalf, however they are not required to pay anything on your behalf. You must negotiate these costs when you write your offer.
Myth #6: I can’t use special grants or buying programs with a VA Loan.
Truth: The only limitations you would have with special programs would be if the program itself limited you on the type of loan you could use. However, VA loans do not limit you. There are a lot of great options for military and veteran buyers out there. You’ll just need to check with your agent to see what is available in your area. Homes for Heroes is a great national savings program that will provide military and veterans with substantial savings when buying or selling with one of their real estate professionals. Buyers receive rebates, lender credits, title and inspections, and more. Check them out here for more information.
Myth #7: VA loans take a long time to close.
Truth: If you have a lender that is well versed in VA loans you will be able to close very quickly on a VA loan. The things that hold VA loans up are typically issues with your lender. Our preferred lender has closed VA loans for us in less than 2 weeks. A typical and realistic timeframe to expect would be 30 to 45 days. Anything longer than that should be a red flag with your lender. Some nationally recognized mortgage companies such as USAA, Navy Federal, and Veteran’s United will quote 60 days to close. Be aware that these companies do take longer to close because of their company processes. As a result, many sellers will be hesitant to accept offers with pre-approvals from them due to the closing timeframe. Ask your agent for a reputable company that will be able to serve you at high level, and get you closed fast. Requesting a longer closing period may result in paying more for the house to compensate the seller for their time and additional mortgage payments. Of course, your agent can advise you on the best approach for negotiations in situations like this.
Myth #8: I don’t need an inspection because VA will do one.
This is probably one of the most common myths we hear next to not needing money. It is true that the VA appraisal process is stricter than a typical appraisal. The appraiser is not only trained, but also required to evaluate the condition of a property to make sure it meets the VA’s standard. However, this is not actually an inspection. They will only look at certain items such as condition of the exterior (no peeling paint, broken windows, roof condition etc), make sure the systems work (Furnace, a/c, etc), and that the electric panel is to their standard. The risk for you depending on this as an inspection is that there may be other items that would prevent you from purchasing the home, but are acceptable to VA. For example, the appraiser may look at your electrical panel but will not check your wiring. They could deem it acceptable, but then you could still have plugs that are wired incorrectly causing a fire hazard. They are not cheap, but you should always get an inspection for your protection.
Myth #9: I am a veteran, I am guaranteed a mortgage through VA.
Truth: VA loans are guaranteed by Veteran’s Affairs meaning the VA guarantees to insure the loan in case of foreclosure on the lender’s behalf. However, you still have to meet the lender’s requirements for the financing. A point to note on this is that not all lenders have the same requirements for their VA loans. Some lenders require 640 credit score, but some will go down to 580. Interestingly, VA doesn’t have a set guideline for credit scores, so it is always a good idea to shop around if you have a borderline score.
Myth # 10: I can buy any house I want with my VA loan.
Truth: Veteran’s Affairs has guidelines a home must meet in order to qualify for a VA Loan. This goes back to the appraisal as an inspection myth. During the appraisal, the appraiser will determine if the home meets these guidelines. This is one reason it is important to have a real estate professional who thoroughly understands VA loans. A qualified agent should be able to spot the most common red flags that may prevent you from using your VA loan. This is so important because by the time the appraiser goes out, you have already spent money on your home inspection, deposit, and the appraisal! It’s best to know ahead of time so you can either negotiate with the seller to get home to VA condition, or find a better home that will qualify.
Did we miss a myth? Or do you have a questions about VA Loans? Comment below or send us a message at firstname.lastname@example.org!