4 Top Myths Surrounding VA Loans

There's No Reason to Fear VA Buyers

4 Top Myths Surrounding VA Loans
November 9, 2020

Home sellers and their agents may be limiting their potential base of buyers by ignoring a growing pool of them. Mortgage industry software company Ellie Mae reports that loans acquired through the Veterans Affairs (VA) Department account for 10% of all primary insured home loans.

It is easy to see why VA backing is preferable from a buyer's point of view. If you qualify, you can purchase a house with no money down (up to a particular loan limit that varies by market) and no Private Mortgage Insurance (PMI) requirement. Yet, sellers shy away from buyers with VA loans, and seller's agents may serve as a screen to exclude VA-backed offers from ever reaching the seller.

Why is this so? It makes little sense, since the risk of default is borne by the lending institution and not the buyer. In addition, foreclosures on VA homes are less than the default rate of either standard or FHA mortgages.

The main reason appears to be lingering myths associated with VA loans – some with elements of truth from the past and some that simply never had a basis in fact. Let's take a closer look at some of these misconceptions.

  • Slow Process – While the VA is not known for their rapid response to many issues, their record is not bad with respect to loans. Paperwork is involved, but it is comparable to the paperwork necessary to close a standard mortgage.

    The Veterans Association of Real Estate Professionals (VAREP) states that VA loans can actually close faster than conventional mortgages by up to two days. In general, closing times are comparable between VA and non-VA backed loans.

  • Loan Limits – Some home sellers assume that VA applicants cannot afford their more expensive homes and exclude them from the pool of potential buyers. However, the basic entitlement for every eligible veteran is $36,000, and lenders will typically allow a loan of up to $453,000 (or higher in some counties with unusually high average home prices) without having to apply any down payment.

    Veterans may also add some of their own down payment money and qualify for higher loan amounts, which would be considered VA jumbo loans. Terms of these larger VA loans are still favorable for qualifying buyers compared to the open market.

  • Qualification Concerns – Historically, minimum credit scores are lower for VA loans than for conventional loans. In times of tighter credit (like today), VA loans become an even better deal as conventional loans become harder to get. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

  • Limited Buyers – If you do not live near a military base, you may not even consider that many qualified service members live nearby. There are around 22 million combined veterans and active duty military in the U.S., according to the National Center for Veterans Analysis and Statistics. The National Association of Realtors (NAR) estimates that around 16.4 million of these service members had mortgage loans in 2014. The NAR's 2018 Veterans & Active Military Home Buyers Profile reported that 77% of active-duty military homeowners and 58% of veteran homeowners have VA loans.

That leaves a potential of about 6 million veterans as buyers, not to mention those who hold non-VA loans and may retain their entitlement for the purchase of a different home.

If you are selling your home, please do not exclude VA-backed loan applicants from your pool of buyers. They have put up with enough during their service time to our country and do not need any added difficulty in finding the home of their dreams.

MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders.

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  Conversation   |   14 Comments

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Erin | 06.10.16 @ 19:12
I don't know anything about VA loans, but it's nice to know they are not as horrible as some might say. I will pass this info along to those who can use it. Thanks!
Alec | 06.10.16 @ 19:13
I honestly didn't even know that VA loans were basically frowned on in the market. My husband is a veteran and I think when we buy a house we will get a loan through a military bank or the VA if we qualify. Hopefully it won't make things harder for us!
Amanda | 06.10.16 @ 19:17
Never paid much attention to VA loans. But this is a nice list of info. It's amazing the things we don't know.
Kamie | 06.10.16 @ 19:18
Do not know much with the VA loans, but it is such a low number of those who could get a loan that are not trying. Large number of veterans that could be with a home.
Carla | 06.10.16 @ 19:20
This is great news for realtors and lenders. We have a lot of veterans in our area.
Daniel | 06.10.16 @ 19:21
I have only heard about VA loans from others but the stories I heard were actually good ones so getting these myths out there is very helpful
trish | 06.10.16 @ 19:26
My nephew is in the military. Will definitely share this article with him. Wished they made things easier on those that do so much for our freedom.
Nancy | 06.10.16 @ 19:37
Like a lot of the sellers and the sellers Representatives need to educate themselves. In my opinion a VA loan is a good risk for any seller.
irene | 06.10.16 @ 19:41
I didn't know much about VA loans but this is good info, I didn't know people thought there were so many drawbacks
Steffanie | 06.10.16 @ 19:50
Never knew this about VA loans. Good toknow for future use.
Jane | 06.10.16 @ 19:59
It's interesting to find out that VA loans can closes a couple of days sooner than conventional loans. I never would have guessed that. It makes selling to someone who wants to get a VA loan less time-consuming for all involved.
Vebinista | 06.10.16 @ 20:21
I used to work for a closing company, so I'm familiar with VA loans. They are very beneficial for our military and nothing anyone should shy away from.
Brittany | 06.10.16 @ 20:22
Va loans are both interesting yet.. they seem so much more complicated than need be.
Heather | 06.01.17 @ 16:10
I work with Veterans in Florida, Georgia, North Carolina, Kentucky, Tennessee, Virginia, and Maryland every day. The VA Home loan program is an awesome program that is enabling Veterans to obtain their dream of Home Ownership. 100% Financing, No monthly mortgage Insurance, limited closing costs, low-interest rates! 580 minimum Credit Score! There are so many myths about the program and there isn't anything complicated about it.
$commenter.renderDisplayableName() | 12.04.20 @ 11:02