Unfortunately there’s some bad information out there when it comes to VA loans. I wanted to point out the some of the most common misconceptions and shed some light on them.
“It can’t be used more than once”
Your VA loan entitlement can be used over and over again. In most cases you will need to ensure that the old VA loan is paid off first. There are different funding fees for subsequent use.
“It’s not available above the county limits”
VA loans are available above the county limits with a down payment. You will be required to put 25% of the difference in between the loan amount and the county limit. So for example, if you live in Sacramento
“Prior Bankruptcies, Short Sales, and Foreclosures aren’t allowed”
Prior bankruptcies, short sales, and foreclosures are allowed after a waiting period has elapsed. That waiting period is two years for a chapter 7 bankruptcy and 1 year of on time payment for a chapter 13. For short sales, and foreclosures, you must wait two years from the close date of that transaction.
There are circumstances where this can be waived such as deployment or other military service factoring into the bankruptcy, short sale, or foreclosure.
“It requires a perfect credit score”
This is one of the biggest misconceptions about VA home loans. The VA wants to see a credit score of at least 620 for streamlined approval. However, the VA has no minimum credit score requirement. Each lender has what’s called an “overlay” that will determine their minimum credit score. We currently have a 500 minimum FICO score.
“VA offers aren’t as good for sellers”
Some real estate agents believe that their sellers will net less money by accepting a VA offer versus other loan types. This is due to the VA to have a list of “non-allowable fees”. These non-allowable fees do not need to be paid by the seller. Other parties involved in the transaction, including the veteran, can pay for these fees.
“The VA appraisal is a nightmare”
The VA appraisal is very similar to conventional and FHA appraisals. As long as you’re not looking to buy a house that may or may not be falling over, it won’t cause any more grief than it’s counterparts.
“Veterans are guaranteed a VA loan”
No one is guaranteed a loan. Even service members with VA loan entitlement.
So where does the “guaranty” that is often discussed with VA loans come from? The guaranty refers to the VA insuring the loans so lenders will provide the loan program to veterans. This is similar to other government programs like FHA and USDA operate.
If you need help getting started with your VA loan call us at (916)358-9130 or get started online.