A VA loan could be the answer to many service members and veterans’ prayers. But misinformation and misconceptions can stop thousands of them from actually benefiting from the program available to them.
In fact, a Veterans Administration’s survey showed that one in three veterans didn’t even know about the benefit of a VA loan. And if the vets do know about the loan, sometimes they don’t reach out because they don’t feel they would be qualified.
Tim Storm, sales manager/loan officer for Home Point Financial in Newport Beach, California, says he comes across this problem all the time. With 85 percent of his business coming from VA loans the past few years, he has become an expert in this mortgage and helps as many vets as he can.
“Veterans are great clients. And they tend to refer VA lenders more to their fellow vet friends than other people do to other lenders,” he says. “They are just so happy to have found someone that is familiar with the program.”
The VA home loan is a mortgage option given to veterans, active military members and surviving spouses. The loans don’t come from the VA but from private lenders and are guaranteed by the Department of Veterans Affairs (VA).
The VA said it has guaranteed 21 million home loans since the VA Home Loan Program began in 1944 through the GI Bill. One million loans have been guaranteed in the past two years.
Check your VA home loan eligibility. Start here (Feb 27th, 2025)Benefits of the VA loan program
One of the highlights of the loan is that no downpayment is required, and nearly 90 percent of all VA loans are made with no downpayment. Also, homes purchased with a VA loan are the least likely to be foreclosed upon because of their budget-friendly qualities.
Despite how beneficial VA loans are, there are still a number of misconceptions surrounding the program.
Storm examines these misconceptions and why those eligible for a VA loan may have them.
Common VA loan misconceptions
Misconception #1: I can’t get a VA loan because I’ve had a foreclosure or a bankruptcy
Some home buyers believe they won’t be eligible for a VA loan because they’ve had a foreclosure or bankruptcy in their past. However, VA loans only require that there has not been a foreclosure or bankruptcy in the past two years, and in some cases the past one year, according to Storm. This is a much shorter period than the FHA loans and conventional mortgages require.
Misconception #2: VA appraisals are too picky
Many real estate agents think the appraisal will cause problems and slow down, or possibly stop, the home buying process. They also think the sellers will have a bunch of repair work to do before the loan is approved. “That’s not the case.” Storm says. “They are looking for the typical stuff like flaking paint and wires hanging out of walls. Just like with conventional loans, the seller and buyer agents will negotiate to have those fixed. It’s hardly ever an issue with the VA loans I’ve dealt with.”
Misconception #3: VA loans take longer to close than FHA or conventional loans
Many people think that VA loans will always take over 60 days to close. “Our loans have closed in 30 days or less,” Storm says.
The process has become much more automated and efficient with the guaranty program. Also, the loan doesn’t actually come from the VA, it is only backed by the institution. So the misconception may come from associating VA loans with the current VA hospital situation where people might wait for months and months to see a doctor.
Misconception #4: VA loans aren’t as good as FHA loans
While FHA loans are one of the best loans available, VA loans will consistently beat them. VA loans have some of the lowest mortgage rates available for a loan type. Also, a VA loan doesn’t require a downpayment while FHA loans require at least 3.5 percent down.
There are times when an FHA loan might work better for someone than a VA loan, but overall, the VA loan is tough to beat.
Misconception #5: You need “great” credit to get a VA loan
Home buyers do not need “great” credit to get a VA loan. In fact, VA loans don’t require any particular credit score. However, lenders will generally look for a score of at least 620. Storm’s company will accept VA borrowers with scores as low as 580.
“Sometimes, their low score is out of their control.” he says. “We do a manual underwriting and look at the file. We call it a ‘make sense’ loan.”
Misconception #6: You can’t get a big enough loan for the house you want to buy
Depending on the area, there is a loan limit for VA loans. However, there is a way to get approved for a larger loan amount. Larger loan amounts will require a specific downpayment from the home buyer.
Fortunately, the required limit can be quite low. “A veteran just has to put down 25 percent of the difference of the zero down payment and the purchase price,” Storm says.
For instance, if the loan limit is $625,000 in that area, and the veteran is buying a $725,000 home, he will need a down payment of only $25,000.
VA loan: The best mortgage available
A VA loan can be an amazing benefit for those who served our country. VA loans are easily the best mortgage option availabe to former or current service members.
If you are looking to buy a new home, find out if you are eligible for this buyer-friendly mortgage program.
Check your VA home loan eligibility. Start here (Feb 27th, 2025)
