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Debunking the Common Myths about VA Loans: What You Need to Know (Part 1)

June 28, 20234 min read

VA loans are a top-tier mission objective for eligible vets and active-duty military members aiming to secure home base. But, there are a few enemy agents, myths masquerading as facts, that can derail this operation. In this briefing, we'll engage these myths head-on, neutralize the misinformation, and equip you with accurate intel on VA loans. Stand by for the truth you need for a successful mission.

Myth #1: VA loans are denied at a higher rate (risk)

Fact: Actually, VA loans have the lowest denial rate!

Some people think the VA funding fee means VA loans are riskier. But that's false based on data:

  • VA loans have high approval rates, near the top with FHA loans. In 2020, 92.9% of VA loans were approved.

  • VA loans have denial rates of 7.1% - way lower than FHA at 11.5% or Conventional 10.4%.

The funding fee doesn't actually reflect risk. Here are the facts:

  • The VA underwriting process is very strict. They check your income, credit score, assets and ability to pay in-depth.

  • That thorough process leads to lower default rates.

  • Lenders like VA loans because the VA guarantees up to 25% if you default. So they're willing to give Veterans larger loans and better rates.

The funding fee just covers expenses - it doesn't mean VA borrowers are riskier.

In fact:

  • VA loans have the highest approval rates

  • VA borrowers default least often

  • The VA screening process ensures stronger candidates

So despite myths, VA loans provide the lowest risk option for eligible Veterans!

Myth #2: VA loans are expensive for Veterans

Fact: Actually, VA loans save Veterans a lot of money!

VA loans have some upfront fees:

  • The funding fee ranges from 1.4% to 3.6% of the loan amount.

  • But disabled Veterans and surviving spouses don't pay the fee.

Interest rates are slightly higher, only 0.25% more on average. That's just a small difference for most borrowers.

Where VA loans really shine is:

  • No down payment needed. With a conventional loan, Veterans must put down at least 5% down and pay private mortgage insurance (PMI).

  • No private mortgage insurance (PMI). With a conventional loan, Veterans pay PMI until they have 20% equity, costing thousands.

  • VA loans may qualify Veterans for larger loans since the VA steps in if you default, reducing risk for lenders.

  • The funding fee can be rolled into the loan amount. And after paying it, there are no more ongoing VA fees.

The small upfront costs are dwarfed by the huge benefits:

  • No down payment

  • No private mortgage insurance

  • Ability to qualify for a larger loan amount

Over time, VA loans actually save Veterans tens of thousands of dollars versus conventional loans. So VA loans provide the most affordable option for eligible borrowers despite any upfront expenses.

Myth #3: People with weak financial backgrounds use VA loans and other “no down payment” mort- gages to buy homes

Fact: Some folks claim VA loans and other no-money-down mortgages pull in borrowers with shakier finances. But that's not completely true.

The application process is actually just as thorough for VA loans as it is for conventional loans.

Getting approved for a VA loan depends more on your financial responsibility, not weak finances.

In fact, VA loans have:

  • Stricter qualifying standards

  • Lower default rates than other loan types

  • Higher approval amounts due to the VA backing the loan, reducing risk for lenders.

So while VA loans offer no down payment, the lending process still screens out applicants who aren't ready financially. Eligibility is earned through military service, not financial weakness.

While all mortgages carry risk, VA loans minimize it through their underwriting requirements. Responsible, well-qualified veterans and servicemembers take advantage of the no-down-payment benefit - they don't make up the majority of VA borrowers.

Debunking the Common Myths about VA Loans: What You Need to Know (Part 2)

Expert Guidance for VA Loans

VA loans are a remarkable option for many veterans but can be complex. An experienced VA mortgage professional can help you comprehend and guide you through the process. Working with The Financial Suit's team of expert mortgage professionals can significantly enhance your VA loan experience.

We also have a FREE "VA Loan Guide" to assist you on your path to homeownership. Click the picture below to download your copy and unravel the VA loan process today.


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