7 sneaky VA home loan lies

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Buying your own home is a unique experience for everyone; there is no such thing as a “one-size-fits-all” scenario. And financing with a VA home loan can be confusing and a little scary – so much so that myths surrounding the VA home loan process are rife. Some lenders even rely on your ignorance of the process to improve their bottom line.

How can you play it safe, educate yourself, and get the most of the VA home loan benefits you’ve earned through the service? Familiarize yourself with the VA home loan rules and know how to spot a VA home loan lie if you see one.

Lie 1: The VA requires a minimum credit score

There is no minimum creditworthiness set by the VA – null, zip, nada. However, most lenders have their own internal guidelines for minimum credit requirements, often in the 580-640 range. If your credit score is on the lower end of the spectrum, you can still get approved, but expect the interest rate to be higher, like any lender.

Lie 2: The VA has rules on the debt-to-income ratio

There is no VA set debt-to-income ratio, but there is a residual income rule. Similar to creditworthiness requirements, many lenders have their own internal debt-to-income guidelines, but there are some that follow VA rules. Instead, they look at residual income using a formula that takes family size and zip code into account and calculates how much money the family will need after all of their monthly debts are paid. As long as you still have that amount of money, in the eyes of the VA, you can get started.

Lie 3: Before reselling, you need to adhere to a residence schedule

In truth, there is no schedule for residence. You could live at home for a month, a week, or a day and the VA doesn’t care. Rather, the prerequisite is that when you buy the house you intend it to be your primary residence. That’s it. Things happen, jobs and missions come at the last minute, and no one is chasing you to live in a house longer than is practical for your family situation.

Lie 4: You can’t have multiple VA loans at the same time

You can actually have multiple VA loans at the same time. Often families buy a house in one place, have to move and convert the first house into a rental apartment. The VA home loan rules allow them to still buy a second home in their new location with little to no money, depending on the combined price of their homes and the area loan limit at their new location.

Lie 5: You are stuck with the VA funding fee

The VA funding fee can actually be waived. Most of the VA loan closing cost is the financing fee, which is a percentage of the loan amount that can be reduced with a 5% down payment or even 10%. This fee may be waived, however, if the veteran receiving the service has a disability rating, does not require a minimum percentage, or “Associate Service” status. Even if an approved service member changes and has already passed their medical examination and has applied for a disability assessment, the VA will reimburse the funding fee as long as the date on the application is prior to the home closure date.

Lie 6: You have to pay lender fees

Lender fees are not required. The VA allows up to 1% of lender fees in “Section A” of the loan estimate. They are usually referred to as processing fees, subscription fees, management fees, or commitment fees. But a lot of lenders out there do not charge anything. When shopping for a lender, keep in mind that these “normal and customary” fees are not required and can (and should) be negotiated downwards if necessary.

Lie 7: You can’t take someone else’s VA loan rate

VA loans are actually justifiable. If you are buying a home from another veteran whose current loan has a below-market interest rate, you can get that loan on the same terms as long as you qualify for it. That could save you thousands in the long run.

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