VA home loans are among the strongest benefits that veterans can easily access, but there are a few misconceptions that might be preventing some veteran from utilizing them. One fact of veteran life is that benefits aren't usually well-advertised; they usually need to be actively sought out and researched. Considering the number of setbacks that veterans can face during a transition, having accurate information about the VA loan is crucial. Fortunately, Inman Select has collected four common VA loan myths and dispelled them. The data originates from the Department of Veterans Affairs and the 2014 Ellie Mae Origination Insight Report.
1. VA loans feature high note rates.
Reality: VA loans offer a consistently lower note rate over 30 years than both conventional and FHA loans. The 2014 Ellie Mae report showed a 4.12 percent 30-year note rate for VA loans compared to a 4.23 percent rate for FHA loans and 4.49 for conventional loans.
A note rate is a rate of interest written on a promissory note for a mortgage. This isn't the same as the annual percentage rate (APR), which reflects the interest rate after costs beyond the price of the house are considered.
So, consistently low note rates mean consistent savings for VA loan borrowers. Without a down payment on VA loans, a low interest rate means homes are even more affordable to veterans.
2. VA Loans don't close very often.
Reality: According to the Ellie Mae report, VA loans are closing more frequently by a wide margin. 73 percent of VA loans closed compared to 67.9 percent of conventional loans and 61.5 percent of FHA loans. This is partly influenced by lower credit score requirements for VA loans. Lenders tend to look for a minimum score of 620 from VA buyers which is roughly 100 points lower than the requirement for most other loans.
3. It takes a long time to close a VA loan.
Reality: If you're worried that VA-backed loans take too long to close, fear not. The Ellie Mae report indicates that both VA and FHA loans take an average of 40 days to close while conventional loans take 39 days to close. VA loans don't pull ahead in this regard, but they certainly aren't any worse off than other types of loans.
4. VA loans aren't growing.
Reality: You might have heard that VA loans aren't growing, but that information is clearly untrue. If you're using popularity as a measure of value, then VA loans should be well on your radar. Over the course of 70 years, VA has backed 20 million loans and the numbers are climbing.
Between the fiscal years of 2007 and 2013, VA loan use has grown 370 percent, and the numbers in 2014 are up 13 percent from 2013.
With this type of massive growth, the VA loan is a serious mortgage contender and definitely worth a veteran's time to research.
Bonus Myth. I don't need to shop around.
Reality: VA loan rates are not set by the government. The best first step you can take is to shop around and get quotes from multiple lenders. We match you with up to five rates from competing lenders, giving you a head-start on the process.