As an active duty, retired, or separated military member you know you have many benefits available to you but do you understand your benefit for the VA home loan? While it is true that
VA Loan Myths For Buyers
As an active duty, retired, or separated military member you know you have many benefits available to you but do you understand your benefit for the VA home loan? While it is true that sometimes using a loan guaranteed by the VA puts you at a slight disadvantage sometimes it's only because there are a lot of myths about this loan type. Using a REALTOR® that is well versed in the VA home loans will help you be successful in buying the home of your dreams. Today I'm not going to talk about the myths that we must overcome with sellers. Today we are going to discuss the myths that you as a buyer may believe. Let's get started.
As a veteran you are guaranteed a loan
Unfortunately, this is not true. You must qualify for the loan just like any other borrower. However, the VA loan requirements are much more lenient than that of other mortgages. The VA looks at the whole credit story instead of just a number or an incident. Missing a few payments which lowered your credit score may have been the result of extenuating circumstances that have since resolved. In this case, the underwriting may not count that against you. Whereas any other loan has strict guidelines they must follow. The VA loan also has the lowest interest rate of any other loan type.
I can't purchase a home because I need a big down payment
Not only do you not NEED a big down payment, the VA loan doesn't require a down payment if you have enough entitlement. However, this doesn't mean that you can purchase a home without paying any money at closing as we will discuss below.
I can't get a VA loan because I have a foreclosure/bankruptcy/short sale on my credit
While a foreclosure, bankruptcy or short sale will have an adverse affect on your credit it doesn't automatically disqualify a borrower. If you have reestablished your credit you can qualify for a VA mortgage in 2 years from the date of discharge of bankruptcy or date of transfer of foreclosure or short sale. If the short sale was completed without missing a single payment or was a result of circumstances beyond your control. It is good to keep in mind that the exception to the short sale rule is not very common.
I already have a VA loan on a property that I don't want to sell so I can't get another VA Loan
While it is true that you can only get a VA loan on your primary residence it is not true that you cannot have more than one VA loan at a time. If you are moving to a new primary residence but want to keep your old property as a rental or 2nd home you can do that. However, remember that your eligibility will be decreased by the loan amount of the existing home. So let's say your original entitlement is $400,000. The amount of the loan on your existing home is $200,000. You must subtract $200,000 from the $400,000 entitlement to get a remaining entitlement of $200,000. That is the amount you can borrow without a down payment. Should you decide you would like to purchase a home that is $250,000 then you would need to have a down payment of $12,500 which is 25% of the difference between the purchase price and your maximum eligibility amount.
I can close with no out-of-pocket costs
As mentioned above, although a VA mortgage can be a zero down loan you will still, in most cases, need to have cash to close. You may have heard the term "closing costs". Closing costs include your down payment if necessary but also things like title insurance, a lender's title policy, lender fees and inspections. You can generally estimate closing costs to be about 2% of the purchase price of the home to get an idea of how much you might need. Sometimes, in some markets, we can ask a seller to "help" with closing costs but that is not always a possibility. Again, this is where an experienced REALTOR® comes in.
VA loans have a higher interest rate
You might think that because this is a zero down loan (in most cases) the interest rate would be higher. The reality is though that generally VA interest rates will be the lowest rate that a lender will offer.
If you would like more information about a VA Loan or any other type of loan give me a call at (505) 500-4370 to get your questions answered.
Regina McKinney is an "outside-the-box" thinker with her finger on the newest, innovative ways of marketing your home. Her deep understanding of the role technology plays in today’s real estate mar....
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