Common misconceptions and myths about VA-backed loans.
Misconception: Down payments and credit score requirements prevent one from obtaining a VA-backed home loan.
Reality: While lenders may require a down payment or minimum credit score, the VA itself doesn’t require a specific one. The decision is, ultimately, left to the authority of the lender – meaning that the assumption of a down payment or minimum credit score being required may be misguided.
Misconception: VA home-loans are only for honorably discharged veterans.
Reality: Not quite. VA-backed home loans may be available to active duty servicemembers, some reservists/guardsmen, and (in some circumstances) a veteran or servicemember’s spouse.
Misconception: The VA limits loan amounts and property values for VA-backed loans.
Reality: Not quite. The VA has a limit on the maximum amount of the loan they will guaranty/back, but the actual value of the property isn’t restricted by this limit.
Misconception: VA-backed home loans don’t have competitive rates compared to other mortgages.
Reality: Quite the opposite. The VA’s backing provides a level of security lenders rarely enjoy, and based on this many lenders provide very competitive/favorable rates for qualifying veterans and servicemembers.
Misconception: VA-backed home loans can only be used to purchased traditional, single-structure housing.
Reality: VA-backed home loans can be used to purchase many types of properties: homes, some condos, manufactured homes, etc.
Misconception: VA-backed loans cannot be refinanced easily/effectively.
Reality: The VA allows for Interest Rate Reduction Refinancing Loans (IRRRL’s) – which are streamlined in an effort to allow veterans and servicemembers who qualify to obtain better interest rates via refinancing.