4 Outright Lies Veterans Believe About VA Home Loans

(U.S. Army/Sgt. Eric Glassey)

In the U.S. housing market, competition for location, location, location has sent prices through the roof (not literally, but still: get an inspection). Buyers using VA home loans can feel good about saving as much money as possible, no matter what their agent or lender says.

A recent Navy Federal survey of 1,000 service members and veterans revealed a lot of misconceptions about VA home loans; how they're used, the loan origination process, and exactly how much of a benefit they really are.

To be clear: VA home loans are one of the most potent benefits of military service. With no down payment, lower credit requirements, and inspections that ensure the property is sanitary and safe, they offer significant benefits and savings for veterans. 

Veterans in the market for a house should not be taken in by the following myths:

1. Lenders don't know how to process VA home loans.

This is an enduring myth from the days before things like the internet and email. Some lenders believed a VA loan was difficult to originate within the vast bureaucracy of the federal government. Like any other job, however, people get better at it.

These days, there are banks and credit unions just for military personnel, veterans and their families that specialize in VA home loans. Most financial institutions open to the public also offer training to their lending staff or hire employees with this expertise.

2. You can use a VA home loan only once.

There are many types of VA home loans. Usually, when people refer to "VA home loans," they mean the VA-backed purchase loan, which can be used to buy a single-family home, condo or manufactured home or to build a home. You can even use it for improvements on the home you buy.

Once they purchase the home, veterans must occupy their new house within 60 days. If they choose to sell at a later time, they can buy another house with another VA-backed purchase loan, so long as that new home is now their primary residence. Vets can also assume a VA home loan when buying from another veteran. The only stipulation is that you get just one loan at a time.

3. VA home loans come with a higher interest rate.

This is another falsehood. Although the VA doesn't set interest rates, the VA home loan comes with a slew of benefits, some that might seem hard to believe in today's housing market. With full entitlement, there is no down payment, and if you have full entitlement, the VA no longer imposes a home loan limit. 

"Full entitlement" means it's your first time using your VA loan benefit, or you sold your previous home and therefore your prior VA loan has been paid in full. This is true even in cases of foreclosure or short sale as long as the prior VA loan has been satisfied. 

Read: Veterans Are More Likely to Own a Home. Here's Why.

With these protections in place, lenders usually offer a VA home loan at 0.5% lower than conventional loans. The VA also limits the origination fee to 1% of the mortgage, which means closing costs are often lower.

4. It takes more time to process a VA home loan.

There is actually little difference between closing on a VA home loan and closing on a conventional loan. Both require similar paperwork, and even increased VA-mandated inspections still happen relatively quickly.

In truth, both VA home loans and conventional loans are often closed within 30 days, and an overwhelming number of respondents to the survey (80%) were happy with the time it took to process their loan.

-- Blake Stilwell can be reached at blake.stilwell@military.com. He can also be found on Twitter @blakestilwell or on Facebook.

Find a VA Loan

If you're ready to move forward, or just want more information, the first step is to connect with a VA Mortgage Expert by answering a few simple questions. 

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