Minneapolis, MN: VA home loans are one of the greatest benefit to our U.S. Military personal that most vets will ever use. Dispelling VA loan myths that prevent them from using their benefits is therefore very important.
VA loan Myth 1): All veterans are guaranteed a VA loan.
Reality: Veterans are NOT guaranteed a VA loan. All loans, even VA loans have fairly standard underwriting guidelines that all applicants must meet, including debt-to-income ratios, credit scores, The confusion generally starts with that the Veterans Administration does NOT actually do loans. Instead, the VA guaranty is to the lender that actually makes the loan. If the veteran defaults, the VA guaranty will pay the lender some or all of their a small percentage of the loan that lenders do if the veterans defaults.
Veterans need to provide a VA Certificate of Eligibility to the lender, which tells us how much VA Guaranty you have available, and if your service in the military allows you to be eligible. If you work with us for your VA loan, we are usually able to obtain your certificate for you.
VA loan Myth 2): VA loans do not have a down payment.
Reality: Almost all VA loans have no down payment requirement, but if you are buying a very expensive home that is over the local area conforming loan limit, you may have a down payment requirement. For almost everywhere in the country, the current no down payment limit is $453,100 (as of this article date). Click here to see how to calculate your minimum VA loan down payment for expensive homes.
VA loan Myth 3): VA loans have no closing costs.
Reality: ALL mortgage loans have closing costs. Appraisal, credit report, state deed taxes, title insurance, first years home owners insurance, and lender related costs. But with a VA loan, just like many loans, you can cover closing costs four ways:
- Pay yourself out of pocket
- Seller paid closing costs
- Increase the interest rate to offset costs
- Any combination of the above.
The combination of all the options is generally what happens. So with most of the VA loans I personally do, you are able to buy with very little out-of-pocket. Under $1,000 is extremely common.
VA loan Myth 4): VA loans require excellent credit
Reality: You don’t have to have perfect credit scores for VA loans, but just like all other loans, as your credit scores go down, your odd’s of loan approval go down too.
As I previously mentioned, the Veterans Administration does not actually give you a loan, authorized lenders do. VA just gives lenders insurance. So while the VA guidelines to lenders says you can potentially get a VA loan with no credit scores, or even super low score, basically no lenders actually offer that.
If your middle credit score is over 640, you are probably OK. Once you drop below 620, expect a lot of no answers UNLESS your overall situation is actually pretty good, but there is some sort of minor fluke item on credit giving you that low score.
Ready to buy a home with the awesome VA Home loans?
Simply contact your local VA loan expect for the best experience, and avoid the large national online VA lenders.
For VA loans in MN, WI, and SD – Simply click here to complete the online VA loan Application, or call us at (651) 552-3681 to speak to one of our VA Loan Experts.
Thank you for your service!