VA loans have grown in popularity in recent years. Nevertheless, many borrowers, home sellers, and real estate agents are skeptical of VA-backed mortgages. They include long closing dates, dense red tape, and strict house inspection standards. While the VA has virtually eliminated the bottlenecks, the stigma lingers.
VA loans also can be a lifesaver for homebuyers with poor credit. The mortgages offer a high degree of flexibility—and save money, too. Unfortunately, VA loan delays have been an issue for decades, along with other complications. However, VA loans’ policies have improved in recent years, increasing their appeal.
Here are seven misconceptions on VA loans that home buyers and sellers should avoid:
Misconception #1: VA Loans Are for First-Time Homebuyers Only
The first-time homebuyer rule is a thing of the past. In fact, many repeat home buyers are turning to VA loans in today’s real estate market. VA mortgages, or second-chance mortgages, have opened up to all buyers, making them more accessible to a larger consumer market.
Misconception #2: Late VA Loan Closings Are a Given
Once upon a time, it was a fact of life that a VA loan transaction would close no later than 30 days past the contract date. These days, that’s no longer true.
Today, VA lenders are delivering closings in as short a span as days — and in many cases, in as little as three to six business days.
Misconception #3: VA Loans Are Inflexible
At one time, VA loans were difficult to modify—either for an increase in the loan’s principal or for a decrease in the borrower’s monthly payment, but not anymore. The VA now allows for principal and payment increases and decreases—but with some important caveats.
If the borrower needs a principal increase of more than $50,000 to cover repair costs or other unusual expenses, the lender will require approval from the VA. The lender must obtain permission from the Department of Veterans Affairs, in addition to the borrower’s consent, before a modification can take place.
Misconception #4: It’s Impossible to Get a VA Loan on a Short Sale
The VA’s strict eligibility rules have eased up considerably over the last few years. Borrowers who short sell their homes—selling a home for less than the amount of their mortgage—can qualify for VA loans if they can show a sufficient credit history and a stable income.
Misconception #5: VA Loans Require Home Inspections
VA loans don’t require home inspections, which frees up the home buying process. However, home inspectors are typically good to go if you desire a home inspection for homebuying purposes. Indeed, home inspectors usually charge less for a VA loan because there is no need for a separate appraisal.
Misconception #6: VA Loans Are Hard to Obtain
The VA’s strict eligibility rules have eased up considerably over the last few years. Borrowers can qualify for a VA mortgage even if they do not itemize their tax returns—and even if they have a limited credit history.
Some of the most popular VA mortgages now require no lower than 620 credit scores and a 3.5 percent down payment. Despite the credit enhancements, VA mortgages still cost less than conventional loans.
Misconception #7: VA Loans Require Home Inspections
VA loans don’t require home inspections, which frees up the home buying process. However, home inspectors are typically good to go if you desire a home inspection for homebuying purposes. Indeed, home inspectors usually charge less for a VA loan because there is no need for a separate appraisal.
Conclusion
Veterans and active service members still face challenges in this historically tight financial market—but VA mortgages are not one of them. VA mortgages remain a terrific option for many eligible home buyers. The loans continue to offer several advantages, including low rates, no down payments, no mortgage insurance, and no income limits.
What’s more, in today’s super-tight housing market, the VA’s reputation for slow service is receding. VA lenders are delivering speedy closings—and home sellers, who once were wary of VA buyers, are increasingly welcoming VA buyers with their non-existent down payments, quick finishes, and high credit scores.
