Know the Truth About These VA Loan Myths Before You Buy
Unfortunately, even real estate agents and home sellers make wrong assumptions about the VA program.
If you're eligible for this program, here's what you need to know.
Not true. There are, however, rules that keep real estate agents from charging veterans a fee for finding them a property. Under the law, lenders cannot charge "junk fees."
Origination fees cannot exceed 1% of the loan unless it's a construction loan.
VA homebuyers cannot be charged pre-payment penalties for the existing mortgage of the seller.
And while you do pay for the customer costs of title work, which can include attorney services, you cannot be charged for attorneys fees on behalf of the lender.
Myth #2--The Seller Can Pay Up to 4% of Your Closing Costs
This one is not a "yes" or "no." It is true that the seller can pay 4% or more in closing costs. But that's not all.
According to the VA, "Seller concessions do not include payment of the buyer's closing costs, or payment of points as appropriate to the market."
If you have a seller that's eager to part with his property, it is possible for the seller to pay more--up to 4% more on the property value of:
- Buyer's funding fee from VA
- Buyers property insurance and taxes
- Extra discount points to help lower your interest rate
- Buyer's credit card balances so that you qualify for a mortgage
Of course, the house must still appraise for the mortgage loan amount to make this work.
Myth #3--VA Loans Take A L-O-N-G Time To Close
That's a no. the average VA mortgage loan closes in 45 days. For other types of loan, the closing time is 42 days, according to industry analysts Ellie Mae.
If your seller is concerned, get pre-approval from your lender so that you can close quicker.
Myth #4--The Government Sets VA Interest Rates and Closing Costs
The government doesn't lend you money for home buying. However, it does insure the loans. That insurance protects the lender if you default on the loan.
This is an important distinction. The lender may offer VA mortgage loans, but the lender also sets their own interest rates as well as their loan charges. It's up to you to shop around for the best mortgage deal.
Myth #5--VA Mortgage Loans are A Pain
Actually, a VA mortgage is easier to qualify for. Most of the loan process is automated, which makes it speedy. For example, some documents can be obtained electronically, like your Certificate of Eligibility (COE). Your mortgage can be underwritten in the same way.
The only real difference is that you do need a VA-approved appraiser. That could take a little longer and cost a little more.
Finally, and as a bonus myth question, it is partially true that VA loan sizes are limited. If you are getting a 100% VA home loan, the loan amount is limited. If you make a down payment, you can borrow as much as the lender is willing to lend.
Need title insurance for your VA home loan? Talk to us, Lilly Title & Settlement. We love helping veterans!