Homebuying as a veteran: Dispelling 5 myths about VA loans
Home ownership. It’s a dream for everyone, yet can sometimes feel impossibly far away. But for qualifying veterans and their families, VA loans can help jumpstart your path to home ownership by offering exclusive (and often overlooked) benefits. Because they are backed by the US government, VA loans carry unique advantages that separate them from conventional loans. But with so many financing options out there, there can be a lot of confusion about how VA loans work and what sets them apart. Here are your answers to five of the biggest myths surrounding VA loans.
1: All VA loans require a down payment.
- While conventional loans generally require down payment options that can reach up to 20%, no such thing is required with a VA home loan at or under the local conforming limit. Down payments are still an option, of course, but they are not a requirement. The VA allows you to purchase jumbo loans, but requires you to supply 25% of the difference between the loan amount and the loan limit.
2: VA loans are viewed as risky.
- Private mortgage insurance is waived for all VA loans. PMI typically adds 0.2-0.9% of expenses to your monthly mortgage payments when you put less than 20% down. That’s a big additional expense you don’t have to worry about.
3: VA loans are difficult to qualify for.
- VA loans have fewer credit restrictions compared to conventional loans. These reduced restrictions, like a higher debt-to-income ratio and more leniency regarding credit scores, mean it can be easier to qualify. Guaranteed Rate uses 620 credit score as the rough benchmark, though each individual case and lender will vary.
4: Loan terms are fixed in stone.
- Thanks to VA streamline and cash-out loan programs, VA loans are actually easier to refinance than conventional mortgages. The streamline version lowers the mortgage rate of an already existing VA loan, usually for less than the current principal and interest. This means it doesn't require a credit check or appraisal. The cash-out option involves a credit check and appraisal, since the home’s value represents the maximum loan amount and the new loan will be larger than the existing loan.
5: VA loans only apply to the home purchase itself.
- The VA allows for increases to purchase loans for the purpose of making renovations. The VA’s Energy Efficiency Mortgage program, for instance, lets borrowers add up to $6,000 to their home loan amount to install solar heating, insulation and storm windows, among other features.
Wherever you are on your homebuying journey, we’re here to help. That’s why we’re proud to partner with the USO and their USO Pathfinder program to make sure transitioning military members and veterans get the guidance and support they need at every stage of the homebuying process. And for all of 2020, qualifying military homebuyers pay no lender fees (a common fee associated with most mortgages), which can save buyers up to $1290.
Now that you know more, you can start to consider which VA loan might be right for you. One option is our Zero Down for Heroes program, this exclusive program requires no down payment or PMI on conforming, primary residence loans. Contact us to learn more about our unique VA benefits—we’d love to learn more about you so we can help you achieve your financing goals!
 Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors. Contact Guaranteed Rate, Inc. for current rates. Restrictions apply.
Waived lender fee available for VA loans that have a triggered RESPA app date as of January 31, 2019 through January 1, 2021 at 12:00am EST. This offer does not extend to HFA loans. ‘Triggered RESPA’ in accordance with Regulation X, is defined as lender receipt of all six pieces of information received in a secure format; applicant name, property address, home value, loan amount, income and SSN. Not all borrowers will be approved. Borrower’s interest rate will depend upon the specific characteristics of borrower’s loan transaction, credit profile and other criteria. Contact Guaranteed Rate for more information and up to date rates.
Guaranteed Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency.