VA loans are the most misunderstood mortgage program
in America. Industry professionals and consumers often receive incorrect data
when they inquire about them. In fact, misconceptions about the government guaranteed
home loan program are so prevalent that a recent VA survey found that
approximately half of all military veterans do not understand it.
With this in mind, we would like to debunk the most
common myths about VA Loans.
Myth
1: The VA loan benefit has a “one time” use.
Fact: Veterans and active duty military can use the
VA loan many times. There is a limit to the borrower’s entitlement. The
entitlement is the amount of loan the VA will guarantee. If the borrower
exceeds their entitlement, they may have to make a down payment. Never the
less, there are no limitations on how many times a Veteran or Active Duty
Service Member can get a VA loan.
Myth
2: VA home loan benefits expire if they are not used.
Fact: For eligible participants, VA mortgage benefits
never expire. This myth stems from confusion over the veteran benefit for
education. Typically, the Montgomery GI Bill benefits expire 10 years after
discharge.
Myth
3: A borrower can only have one VA loan at a time.
Fact: You can have two (or more) VA loans out at the
same time as long as you have not exceeded your maximum entitlement and
eligibility. In order to have more than one VA loan, the borrower must be able
to afford both payments and sufficient entitlement is required. If the borrower
exceeds their entitlement, they may be required to make a down payment.
Myth
4: If you have a VA loan, you cannot lease the home.
Fact: By law, homeowners with VA loans may rent out
their home. If the home is located in a non-rental subdivision, the VA will not
guarantee the loan. If the home is located in a subdivision (such as a co-op)
where the other owners can deny or approve a tenant, the VA will not approve
the financing. When an individual applies for a VA loan, they certify that they
intend on making the home their primary residence. Borrowers cannot use their
VA benefits to buy property for rental purposes except if they are using their
benefits to buy a duplex, triplex or fourplex. Under these circumstances, the
borrower must certify that they will occupy one of the units.
Myth
5: If a borrower has a short sale or foreclosure on a VA loan, they cannot have
another VA loan.
Fact: If a borrower has a claim on their
entitlement, they will still be able to get another VA loan, but the maximum
amount they would otherwise qualify for may be less. For example, Mr. Smith had
a home with a $100,000 VA loan that foreclosed in 2012. If Mr. Smith buys a
home in a low cost area, he will have enough remaining eligibility for a
$317,000 purchase with $0 money down. If he did not have the foreclosure,
he would have been able to obtain another VA loan up to $417,000 with no money
down payment.
Veterans and Active duty military deserve affordable
home ownership. In recent years, the VA loan made up roughly 13% of all home
purchase financing. This program remains underused largely because of
misinformation. By separating facts from myth, more of America’s military would
be able to realize their own American Dream.
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