VA Home Loans: Removing the Stigma
June 02, 2015
Let’s talk about a guy named Lawrence. Lawrence served our country in the military. Lawrence is guaranteed a home loan through the VA as a benefit for his service, after he, of course, meets certain minimum qualifications.
Lawrence almost didn’t get to close a deal due to a Realtor® who was apprehensive about working with the VA home loan. Fortunately, a knowledgeable loan officer at a brokerage stepped up to point out that the process was really not that complicated, and Lawrence did not miss out on owning his dream home.
This is a real story from a government-backed mortgage office. It is a typical example of the hurdles our veterans and active duty face when they come across those in the financial and real estate industries unfamiliar with the benefits of the VA home loan program.
There are quite a few benefits alongside the assumptions about the VA home loan program. Whether you are a future loan holder or a financial professional working with a prospective home buyer, here are some common misconceptions about this veteran benefit.
Myth: This loan is only for those in the Army, Navy and Air Force, and only for those who have been deployed in the past.
Fact: Separate from other essential qualifications needed - for the main branches of military, 90 during war or 181 days of peacetime duty is required. Reservists with the National Guard and Reserves who have been serving for six years, or for 90 days during war time, qualify for the VA home loan. The loan can also be made available to Public Health Service workers, National Oceanic and Atmospheric Administration professionals, cadets in the Coast Guard and Air Force, Naval Academy shipmen, and surviving military spouses (especially those of POW/MIA soldiers).
Myth: You need a lot of money upfront to qualify for the VA guaranteed amount.
Fact: A down payment is not required for the VA home loan. Closing costs can be paid by the property seller or the lender. You can even get the VA home loan if it’s been two years after a Chapter 7 bankruptcy (or one year after Chapter 13). The veteran or active duty member, or any of the qualifying civilians mentioned, must have had a stable two year employment history and their debt to income ratio (DTI) must dictate that they have more disposable income than what they spend on monthly bills, including paying off other debts like a car loan or medical bills. The interest rate for the VA home loan can also be very low – certain lenders will even present the veteran with a rebate to use towards closing costs if they take an interest rate a little higher than they may have wanted.
Myth: I meet the basic requirements, but this process is going to be difficult and time consuming, so I may just wait until later to take advantage of this loan.
Fact: The process for the veteran can be just as easy as finding a lender specializing in the VA home loan. Upon the submission of an application online, a good lender will get right in touch with a veteran – they will often obtain a COE for the client, as well as other steps like in-house credit inquiries and setting up the veteran with a VA home loan friendly Realtor®, as well as sometimes paying for the buyers closing costs. An expert VA lender wants to help the veteran and will do what they can to make the process as simple as possible. Full loan approval of the loan can happen within days and you could have your new home within as little as a month.
Myth: If you have been discharged due to military related injuries, you will not qualify for the loan.
Fact: Honorable discharges, especially due to injuries while serving our country, are still eligible for the VA home loan. The VA even has SAH grants so that veterans may adapt their primary residence for wheelchair accessibility or towards other medical devices.
Myth: Let’s say I’m a lender and my veteran client is about to default on a loan - I’m going to take a hit, so why put in all the extra time with VA paperwork?
Fact: First of all, the paperwork processing steps are not that intimidating. For example, when speaking on the certificate of eligibility (COE) from the VA, sometimes the veteran will already have that handy, but if not, it’s an instantaneous process via the VA website. You can familiarize yourself with the other steps by clicking here.
Secondly, the VA will do everything it can to prevent a veteran from defaulting on a loan. Some options they will provide veterans are forbearance, connect them with organizations that will give payment assistance, and help conduct compromise sales. The loan may also be assumed by another person, if the VA or the lender approves of it.
Aside from these facts, you must understand that the guaranty from the VA on the loan ensures that the lender does not take a loss in case of any financial hardships the borrower experiences. This fact, above others, should put the lender’s mind at ease. The VA protects the lender by paying what is owed to them if the veteran forecloses.
Myth: The VA home loan process for the Realtor® is an agonizing ordeal.
Fact: Veterans may from time to time come across a Realtor® who will be apprehensive about the VA home loan. They may be confused about this type of contractor deterred by the fact that a down payment is not required, or assume there is too much extra work involved. However, the truth is – there are many lenders and brokers who are very familiar with the VA home loan process and can walk you through the process. The VA also has a comprehensive page with lots of resources for real estate professionals if you click here.