It’s the “information age,” not the “good information age.” Accurate information on any topic can be hard to find, and the VA loan process is no exception. From inaccuracies posted on message boards to bad blogs, there is an abundance of VA loan myths out there.
Let’s tackle the five most common VA home loan myths and reaffirm the strength and flexibility of this unique financing tool. It only takes minutes to fill out our VA home loan application, so start today.
Myth 1: “VA Loans Require Perfect Credit Scores”
Fact: Most VA lenders are looking for a 620 credit score. Let’s put that into perspective.
FICO credit scores range from 300-850 (850 being a “perfect” score). In 2016, the average FICO score for conventional (meaning non-VA and non-FHA) loan purchasers was 737.
Knowing that 850 is a “perfect” score, and 737 is the average conventional score, 620 seems pretty lenient, doesn’t it? Myth busted.
If you’re worried your credit may affect your chances of getting a VA loan, you can take advantage of the free Veterans United Lighthouse Program which guides veteran homebuyers on the path of homeownership by helping strengthen their financial profiles.
Myth 2: “The VA Appraisal is a Nightmare”
Fact: If buyers pursue a home in poor condition, the VA appraisal is certainly nightmarish. Otherwise, the VA appraisal isn’t terribly different from the average conventional appraisal.
Appraisers use the VA’s “Minimum Property Requirement” (MPR) guidelines to determine if a home is safe, structurally sound, and sanitary. MPRs include the following:
- Plumbing and electrical systems must be safe and in good condition
- Heating must be adequate
- Roofing must be adequate
- Loose paint must be scraped and repainted
- No leaks, excessive dampness, defective construction or decay
- No termites, destructive insects, fungus growth or dry rot
It’s clear from reviewing MPRs that VA loans are not designed to fund fixer-uppers. The VA wants service members to purchase solid, move-in ready homes, not dilapidated duds. Choose a home in good condition, and the VA appraisal will be a breeze.
Myth 3: “Veterans are ‘guaranteed’ a VA Loan”
Fact: No one is guaranteed a loan. Even service members with VA loan entitlement.
The word “guaranty” often pops up in VA loan discussions. Consequently, many buyers think military service entitles veterans to a “no strings attached” VA loan.
Not so. The VA loan guaranty refers to the amount of each VA loan that is backed by the government (usually 25 percent of the loan). In case of default, the amount under guaranty will be paid back to the lender by the government.
Just remember that “guaranty” is much different than “guarantee.” Each VA loan is under “guaranty,” but no one is guaranteed a VA loan.
Myth 4: “Any Modern Home Loan Requires a Big Down Payment”
Fact: The VA loan is one of the only mortgages available that doesn’t require a down payment.
There are rules surrounding this perk, but most qualifying service members who purchase within VA loan limits don’t have to make a down payment.
Myth 5: “I Can’t Get a VA Loan if I Have a Foreclosure/Bankruptcy in my Past”
Fact: VA loans are more forgiving than other loan products when it comes to bankruptcy and foreclosure. Getting a new conventional loan after foreclosure requires a 3-year waiting period; bankruptcy requires a 2-year wait.
The bounce-back time to obtain a VA loan is shorter. VA lenders will want you to wait two years before applying if you have a foreclosure or Chapter 7 bankruptcy on your record. If you’re currently paying on a Chapter 13 bankruptcy, it’s possible to obtain a new VA loan with a 12-month history of on-time payments.
But while it’s certainly possible to obtain a VA loan within a short time after a foreclosure or bankruptcy, applicants need to do more than “wait it out.” VA loan applicants need to polish every aspect of their borrower profile, including credit scores, payment histories and employment status.
And that rule goes for every potential VA loan recipient. While it’s important to recognize the flexibility afforded by VA financing, VA lenders aren’t handing out loans to anyone with a social security number.
Just as with any loan product, there are standards to meet, and criteria to satisfy. But for our dedicated service members transitioning to a shaky economy, it’s certainly nice to know that VA loans are more borrower-friendly and accommodating than other loan options.
And that’s a fact.
If you’re ready to move forward with your VA loan or have any further questions, comment below or speak with Veterans United loan specialist at 855-524-7279.
Photo courtesy of deovolenti