The VA mortgage loan is a program designed to help veterans, active duty military members, and their families purchase a home without having to deal with as many bureaucratic guidelines and requirements. However, there are a few misconceptions about the program that often deter veterans from partaking in this hard-earned benefit.
In conjunction with a general misunderstanding of VA home loans, many vets simply don’t have access to all of the information about this historic home buying tool. Because of this, we thought it would be helpful to crack down on some of these misconceptions in order to provide you with the right information and help you kickstart the process of buying your dream home.
What Kind of Rates Do VA Loans Feature?
One of the most common myths about VA loans is that they carry high note rates when in reality, they’re actually one of the best options on the market right now. In fact, interest rates for VA loans are generally lower than their conventional counterparts’ interest rates that can average as high as 4%.
These low interest rates can mean big savings for VA loan borrowers, especially when combined with other program benefits like no down payment and no mortgage insurance. This makes the home-buying process all the more accessible for veterans.
How Long Do VA Loans Take to Close?
Another falsity is that VA loans take significantly longer to close than their conventional mortgages, or worse, that they don’t reach the closing table at all. However, each loan takes relatively the same amount of time to close: FHA loans take an average of 40 days to close, conventional loans close in about 39 days and in fact, the average turn time for VA loans from application to close is only 28 days!* A report by Ellie Mae indicated that VA loans close more frequently at 73% compared to 67.9% of conventional loans and 61.5% of FHA loans.
Additionally, lenders have lower credit score requirements for VA buyers, which not only encourages loans to close but also alleviates some of the financial stress for veterans. This, in conjunction with the 70 year mortgage guarantee provided by the Department of Veterans Affairs, has increased the volume of home loans, debunking the myth that VA loans aren’t growing. In fact, Veterans United cites 705,474 home loans were guaranteed last year, the biggest year in the program’s history.
Who Pays Closing Costs?
While the money-saving benefits are some of the most exciting rewards of the VA home loan program, it’s important to understand that sellers aren’t obligated to pay any costs on the veteran’s behalf. Though the VA limits what closing costs veterans can pay and what lenders can charge, the breakdown of who pays what can always be negotiated.
The veteran can pay for all closing costs if the lender does not charge an origination fee (the cost of opening a new loan application). The VA allows lenders to charge the borrower up to 1% of the amount of the loan. Alternately, the lender can pick and choose among the fees to pay as long as they don’t add up to exceed 1%.
What to Expect During the VA Appraisal
The VA encourages service members to buy sturdy, move-in ready homes as opposed to fixer-uppers in need of renovation, which is why the VA appraisal is considered “strict” to some. However, as long as you choose a home in decent condition and free of safety hazards, you won’t have any trouble with the appraisal.
That being said, the VA appraisal has a set of minimum property requirements (MPRs) in place to ensure the home is safe and sound. Here are the guidelines for MPRs:
Adequate heating and roofing
No defective construction or leaks
No decay, fungus growth, or dry rot
Plumbing and electrical systems must be up to par
No termites or destructive insects
Your VA Loan
Once you earn the VA loan, you can use it over again (even if you’ve lost it to a foreclosure). It’s possible to have more than one VA loan at once; as second-tier entitlement allows service members to purchase a new home through the program after losing the VA loan to foreclosure. As long as you’re a qualified veteran, you’re eligible to use the VA Loan Guaranty Program for life.
Ultimately, the right information makes VA loans more accessible to service members who are trying to buy and refinance their homes. Keystone Alliance Mortgage is a VA-approved lending institution that has helped many veterans and their families. Let us show our appreciation for your service by serving you.
*FYTD 2016, source: Department of Veteran Affairs