Having access to VA home loans (VAHL) is one of the major perks associated with being in the military. VAHL have no or low down payment and offer 100% financing and refinancing on mortgages and flexible credit guidelines. Many new borrowers who qualify for VAHL’s don’t even apply for them because they believe many of the half-truths out there. Because the rules and requirements for VAHL’s are constantly changing, whenever they’re cancelled or modified, word doesn’t always get out. As a result, misconceptions about the VAHL program run rampant. Here are some of the most common myths about the VAHL program debunked.
You Have to Be on Active Duty to Qualify for a VA Home Loan
You do not have to be on active duty to qualify for a VAHL. Your eligibility for a VAHL is determined by your current and past service. Simply put, veterans who have served at least six months between 1964 and the present most likely have VAHL eligibility.
Veterans Automatically Qualify for VAHL
Just because you’re eligible for a VAHL doesn’t mean you’ll be able to get one. Getting a Certificate of Eligibility is only half the battle. You generally need to have a debt-to-income ratio of below 41% and a good credit history if you want your VAHL application to be approved.
Funding Fees for VA Home Loans Are Expensive
The VA funding fee is a one-time fee required by law and it is currently 2.15% on no down payment loans for first-time use and 3.3% for second-time users who don’t make a down payment. The funding fee drops when you make a down payment. Some claim that the funding fee is expensive, but it is actually less expensive in the long term than the private mortgage insurance that it replaces. If you apply for a conventional mortgage, lenders will require you to have private mortgage insurance if you put less than 20% down. Private mortgage insurance typically costs between 0.5% and 1% of the entire loan amount on an annual basis.
VA Home Loans Take Longer to Close
Many people assume that VAHL’s take longer to close than conventional loans but that’s simply untrue. The decision of whether or not to approve a loan is left to private lenders, so the process of applying for a VAHL doesn’t take much longer than the process of applying for a conventional home loan. It is rare for the VA to ever have to step in and look at a loan application. In most cases, VAHL can be closed within a month.
All Real Estate Agents Are Knowledgeable about VA Home Loans
There is no such thing as a VA certification for real estate agents. Therefore, you shouldn’t rely on most real estate agents for advice regarding VAHL’s. Look for a lender whose majority product is VA-backed loans if you want your lender to be knowledgeable about the VAHL process.