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

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 #4: FHA or Conventional loans are better for Veterans than VA loans

Fact: This depends on each individual Veteran’s situation, and we will try to address it as objectively as possible.

Some Veterans think FHA or conventional loans are "better." However, for eligible service members and Veterans, nothing beats a VA loan.

Here's why VA loans are the best mortgage option for most Veterans:

• No down payment required - VA loans let you buy a home with $0 down. FHA and conventional require at least 3-5% down.

• No private mortgage insurance (PMI) - You don't pay ongoing PMI like with other loan types. That saves thousands over the life of your loan.

• VA funding fee waived for some - Disabled Veterans and surviving spouses don't pay the VA funding fee, which is usually 1.4% to 3.6% of the loan amount.

• No ongoing fees from the VA - You pay the funding fee just once, then never face recurring costs charged by the VA.

• Higher approval amounts - The VA backing reduces risk for lenders, so VA loans often receive preferential rates and qualify borrowers for larger loans.

• Lower default rates - VA loans actually default less often thanks to strict underwriting guidelines.

FHA loans come close in some ways but still require 3.5% down and PMI payments.

Conventional loans require 5-20% down and charge PMI, plus higher interest rates.

At the end of the day, VA loans give Veterans the most financing power to buy their dream homes. That's why we proudly recommend VA loans as THE most suitable option for our eligible military customers.

Myth #5: VA loan appraisals are slow to process and usually come back with low values

Fact: Most VA Appraisals Are Timely and Fair

Some Veterans complain VA appraisals take too long or undervalue their homes. But the truth is, most VA appraisals are processed within a reasonable time frame and reflect an accurate, unbiased market value.

Here are the facts about VA appraisals:

• The VA uses licensed appraisers just like any other lender. They follow standard appraisal practices to determine market value.

• Many factors influence appraisals - including recent comparable sales, condition of the home, and market trends at that time. The VA itself does not set appraisal values.

• VA appraisals tend to take 2-3 weeks on average to complete. This is similar to turnaround times for conventional loans and FHA appraisals.

If a VA appraisal does come in low, borrowers have options:

• Request a reconsideration of value directly with the VA

• Pay the difference between the sales price and appraised value

• Negotiate with the seller to reduce the purchase price

• Arrange for a new appraisal to identify comparable sales the original appraisal may have missed.

So while occasional issues arise, most VA appraisals:

• Take a reasonable amount of time

• Reflect the home's true market value based on data

• Provide options if a low appraisal does occur

And due to the VA's role protecting taxpayer funds, appraisers perform their due diligence to ensure values align with market reality, just as for any loan type.

Overall, VA loans actually boast among the lowest default rates thanks to cautious appraisals - proving the system generally works. Any delays or low values tend to be the exception, not the rule.

Myth #6: Sellers have to pay all closing costs

Fact: Origination charges, appraisal fees, title charges, discount points, credit reports, and well and septic inspection fees need to be paid by the borrower at closing. 

With exceptions, the Wood Destroying Insect Report (WDIR) fees are the only costs that the Veteran cannot pay, but the real estate agent may be able to cover them. Other state-specific deviations can be found on the State Fees and Charges Deviations Change Sheet.

In some states, the Veteran is permitted to pay for the required pest report and the cost of the Section 1 repair. This may not seem advantageous to the Veteran, but it can be a selling point to entice the listing side and negotiation piece to strengthen the borrower’s offering power in a purchase scenario property taxes from their income taxes, closing costs essentially represent the buyer's investment in homeownership.

Myth #7: VA loans can only be used once

Fact: Some Veterans think you're only allowed one VA home loan in your lifetime. But that's not true - eligible Veterans can utilize VA loans to purchase multiple homes over time.

Here are the facts:

There's no limit on how many VA loans a qualifying Veteran can obtain.

Veterans can use a VA loan to buy:

• Their primary residence

• A second or vacation home

• An investment property

• Multiple properties in succession over the years

Veterans must live in or intent to live in the home purchased with their VA loan for at least one year. After that, they can sell the home and use the VA loan benefit again.

Each VA loan requires requalification based on:

• Credit score and debt-to-income ratio

• Employment and income verification

• Verification of funds for closing costs

But there's no restriction against using multiple VA loans over time as long as the borrower continues to meet eligibility guidelines with each application.

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

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.