Having access to VA Home Loans (VAHL) is one of the main advantages associated with military service. VAHL has little or no down payment and offers 100% financing and refinancing on mortgages and flexible credit guidelines. Many new borrowers who qualify for VAHL do not even apply because they believe many of the half-truths that exist. Because VAHL rules and requirements are constantly changing, every time they are canceled or modified, word doesn’t always get out. As a result, misconceptions about the VAHL program run rampant. These are some of the most common myths about the VAHL program debunked.
You must 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 served at least six months between 1964 and the present are more likely to be eligible for VAHL.
Veterans automatically qualify for VAHL
Just because you are eligible for a VAHL does not mean that you will be able to get one. Obtaining a certificate of eligibility is only half the battle. Generally, you must have a debt-to-income ratio below 41% and a good credit history if you want your VAHL application to be approved.
VA Home Loan Financing Fees Are Expensive
The VA financing fee is a one-time fee required by law and is currently 2.15% on loans with no down payment for the first use and 3.3% for second time users who do not make a down payment. The financing fee is reduced when you make a down payment. Some claim that the financing fee is expensive, but it is actually less expensive in the long run than the private mortgage insurance it replaces. If you are applying for a conventional mortgage, lenders will require you to have private mortgage insurance if you make a down payment of less than 20%. Private mortgage insurance generally costs between 0.5% and 1% of the total loan amount annually.
VA home loans take longer to close
Many people assume that VAHLs take longer to close than conventional loans, but that is simply not true. The decision to approve a loan is left to private lenders, so the application process for a VAHL does not take much longer than the application process for a conventional home loan. It is rare that the VA has to step in and examine a loan application. In most cases, VAHL can be closed in one month.
All Real Estate Agents Know About VA Home Loans
There is no VA certification for real estate agents. Therefore, you should not rely on most real estate agents for advice on VAHLs. Look for a lender whose majority product is VA-backed loans if you want your lender to know about the VAHL process.