7 VA Loan Myths Veterans Need to Know in 2024
For veterans or active-duty service members, the VA loan benefit is one of the most valuable home-purchasing resources. However, misconceptions often lead veterans to miss out on these great benefits or face unnecessary hurdles. This guide covers the 7 VA loan myths veterans need to know before purchasing a house in 2024. With this information, you can confidently use your VA loan and take full advantage of its perks.
At Gustan Cho Associates, we regularly hear from veterans who’ve received misleading information about VA loans. Our goal is to clear up the confusion so you know exactly how to maximize your VA loan benefit. Whether you’re using a VA loan for the first time or it’s been a while since your last one, let’s set the record straight.
Myth 1: The VA Requires the Seller to Cover Loan Fees
One common VA loan myth veterans need to know is that the VA requires sellers to cover certain closing costs. Many think the seller must pay specific fees if they buy a home with a VA loan. This isn’t true.
With VA loans, closing costs are always part of the home-buying process. These costs aren’t unique to VA loans; they’re simply the fees associated with purchasing a home, covering expenses like appraisal fees, lender fees, and title insurance.
Here’s the reality:
- VA loans don’t require the seller to pay any closing costs. It’s up to you and the seller to negotiate who covers what.
- Seller concessions can help reduce your closing costs. Sellers may cover some of these costs if they choose to, but it’s not required.
- Veterans with Certificate of Eligibility (COE) certificates can purchase a home with no down payment with 100% financing.
In a competitive market, requesting fewer concessions can make your offer more appealing. Consider discussing your strategy with your loan officer to make your offer competitive while securing the best deal. Speak With Our Expert to Get a VA Loan
Myth 2: Sellers Can Only Contribute 4% to Closing Costs
One more common misconception about VA loans is that sellers can only assist with up to 4% of the sales price for closing costs. The reality is that they can frequently contribute more than that.
Here’s how it works:
- Sellers can offer concessions up to 4% of the sale price to help with closing costs and associated expenses. This can encompass activities such as reducing your debt or addressing prepaid costs.
- On top of that, additional seller concessions are possible. For example, seller credits may cover prepaid taxes and insurance costs. So, the 4% limit isn’t as restrictive as it sounds.
In 2024, VA guidelines remain flexible, making it easier for veterans to negotiate terms that work in their favor. If you plan on asking for help with closing costs, make sure your real estate agent and lender explain these options in detail.
Myth 3: VA Loans Take a Long Time to Close
Many believe VA loans are full of red tape and, therefore, take longer to close than other types of loans. However, with an experienced lender, VA loans can close just as quickly as conventional loans—often within 30 days or less.
Here’s what to expect:
- VA loans can close in 30 days or less if the lender has experience handling VA loans. At Gustan Cho Associates, we close most VA loans in about a month.
- The termite inspection and Notice of Value (NOV), required by the VA, shouldn’t add much time if the loan team is efficient.
When working with an experienced VA loan team, closing time doesn’t need to be a hassle. Work with a lender known for successfully closing VA loans to guarantee an efficient process.
Myth 4: The Government Sets VA Loan Rates and Closing Costs
Many veterans believe the government sets VA loan interest rates and closing costs. However, the VA doesn’t actually lend money; they only guarantee a portion of the loan.
Here’s the truth about VA loan rates:
- Each lender sets its own VA interest rates and fees. The VA guarantees the loan but doesn’t control the rates or closing costs.
- Interest rates for VA loans generally follow market trends. Because the VA loan market is competitive, rates for VA loans are typically on par with other loan types.
When shopping for a VA loan, be sure to compare lenders. You’ll likely find similar rates among VA lenders, but the terms and fees can vary. Shopping around can help you find the best deal on your VA loan.
Myth 5: VA Loans Are a Hassle to Use
It’s a misconception that VA loans are complicated and have unnecessary requirements. In reality, when managed by an experienced team, VA loans can be as straightforward as any other loan type.
Here’s what makes the process easier:
- An experienced VA lender will know how to streamline the loan process, from termite inspections to promptly issuing the NOV.
- The loan team at Gustan Cho Associates has handled hundreds of VA loans, many of which closed in 30 days or less.
The process is usually easy if you work with a lender who knows a lot about VA loans. VA loans are specifically designed to assist veterans and active-duty service members in purchasing their homes. These loans provide valuable benefits to those who have served, making homeownership more attainable. With the right support, buying a home can be hassle-free.
Myth 6: VA Loans Have Loan Limits
A big myth that continues to circulate is that VA loans have limits. In the past, VA loans did have loan limits that aligned with conforming loan limits, but this changed in 2020.
Here’s the current situation:
- VA loans no longer have maximum loan limits. This means veterans with full entitlement can buy a home for any price they’re qualified, without needing a down payment.
- However, lenders may set their own credit score requirements and still perform their own risk assessments, which can include checking your debt-to-income ratio.
This benefit of no loan limits makes VA loans incredibly valuable, particularly in high-cost markets. With VA loans, veterans can purchase higher-value homes without the typical down payment requirements.
Myth 7: VA Loans Require a 620 Credit Score and a Low Debt-to-Income (DTI) Ratio
A widespread myth about VA loans is that veterans need a high credit score or a strict debt-to-income ratio to qualify. This isn’t the case.
In fact:
- The VA does not require a minimum credit score. Instead, lenders use a system called Automated Underwriting System (AUS) to evaluate loan applications. At Gustan Cho Associates, we have approved VA loan applicants with low credit scores like 560 or below, as long as the AUS gives its approval.
- Debt-to-income ratios are also flexible. VA guidelines don’t specify a maximum DTI, although lenders may set their limits. Veterans can still qualify with high DTI ratios if they have compensating factors, such as savings, consistent income, or a strong rental history.
This flexibility is one of the reasons VA loans are often a top choice for veterans with unique financial backgrounds. Talk to your lender about your credit standing and debt-to-income ratio. You might be more qualified than you think. Get Qualify for VA Loan with Gustan Cho Associates
Why VA Loans Are Still the Best Option in 2024
VA loans remain a top choice for veterans looking to buy a home because they offer numerous advantages, including:
- No down payment requirement
- No private mortgage insurance (PMI)
- Competitive interest rates
- Flexible credit and DTI requirements
However, these myths can sometimes discourage veterans from taking advantage of their benefits. Knowing the facts can help you go through the home buying process confidently and avoid missing out on this fantastic opportunity.
Ready to Apply for a VA Loan? Connect with Our Experts
At Gustan Cho Associates, our experienced VA loan team is here to help you navigate every step. We know that veterans and active-duty service members have special needs when it comes to loans. We aim to make getting a VA loan easy and straightforward. Contact us today if you’re ready to buy or refinance your home with a VA loan.
We understand the needs of veterans and active-duty service members are unique. And we strive to provide a smooth, straightforward loan experience. If you’re ready to take the next step in purchasing or refinancing your home with a VA loan, contact us today.
Contact us at 800-900-8569 or email gcho@gustancho.com to start the pre-approval process or discuss your VA loan questions. We’re here to support you 7 days a week, including evenings, weekends, and holidays.
Don’t let myths hold you back—secure your VA loan today and enjoy the homebuying benefits you’ve earned!
Speak With Our VA Loan Officers, Click Here
Frequently Asked Questions About 7 VA Loan Myths Veterans Need to Know:
Q: What are the Top 7 VA Loan Myths Veterans Need to Know?
A: The main myths are about who pays closing costs, how long VA loans take to close, loan limits, credit score requirements, and more. Knowing the truth can help veterans make the most of their VA loan benefits.
Q: Does the VA Require the Seller to Pay My Closing Costs?
A: One of the 7 VA loan myths veterans need to know is that sellers are not required to cover closing costs. It’s up to you and the seller to negotiate who pays these costs.
Q: Can the Seller Only Contribute Up to 4% of the Sale Price for My Closing Costs?
A: No, while many think sellers can only contribute up to 4%, they can often cover additional costs beyond this, like prepaid expenses, if both parties agree.
Q: Do VA Loans Take Longer to Close Than Other Types of Loans?
A: Not necessarily. With an experienced VA loan team, VA loans can close within 30 days, similar to conventional loans. This is another one of the 7 VA loan myths veterans need to know.
Q: Does the Government Set Interest Rates for VA Loans?
A: The VA does not determine interest rates or closing costs. Individual lenders establish their own rates according to the market.
Q: Are VA Loans Difficult to Use?
A: VA loans are easy when you work with an experienced lender. A knowledgeable team will guide you through every step, making the process as smooth as possible.
Q: Is There a Loan Limit on VA Loans in 2024?
A: No, as of 2024, there is no maximum loan limit for VA loans. Veterans with full entitlement can purchase homes with no down payment, even at higher prices.
Q: Do I Need a 620 Credit Score to Get a VA Loan?
A: No, this is one of the common myths. The VA does not have a minimum credit score requirement. Lenders may set their own requirements, but veterans with lower scores can still qualify if they meet other criteria.
Q: Are VA Loans Available for Veterans with a High Debt-to-Income (DTI) Ratio?
A: Yes, the VA doesn’t set a strict DTI limit. Veterans with higher DTIs can still qualify if they have compensating factors like steady income or savings.
Q: Why are VA Loans Still the Best Choice for Veterans in 2024?
A: VA loans offer no down payment, no PMI, flexible credit requirements, and competitive rates. Despite the 7 VA loan myths veterans need to know, VA loans remain one of the best options for veterans.
This blog about “7 VA Loan Myths Veterans Need To Know” was updated on November 14th, 2024.
