4 Common VA Home Loans Myths Debunked

If you're a service member or a veteran in the market for a new home, it’s likely that getting a VA (Veterans Affair) home loan has crossed your mind. Perhaps you heard about all the ways a VA loan trumps a conventional loan, such as...

• Little-to-no down payment required
• No PMI (Private Mortgage Insurance), which is a requirement for borrowers putting down less than 20% of the mortgage amount.
• No prepayment penalty
• No minimum credit score

These are amazing benefits. Yet, you may have also heard reasons why not to get a VA loan. All of which are based on fears and misconceptions that have been passed down over the years.

However, these fears and misconceptions are unfounded and based on the issues that happened in the past. In fact, there have been several changes since the VA loan program was established in 1944. So, let’s debunk those myths right now for you.

MYTH #1: VA loans are harder to close than other mortgage types

There is a belief that financing for a VA loan is more difficult to qualify for. That’s why sellers may be worried the buyer will not get funding if the VA loan does not close. This could not be further from the truth.

First, VA loans allow for a high debt-to-income level and has a forgiving credit score and history requirement (as low as 550 credit in some cases). Plus, VA loans often close at almost the same and in some cases even better rates than other mortgage types.

Here is recent data from the ICE Mortgage Technology:

• About 79% of all home purchase loans close
• 77.7% of VA purchase loans close
• 79.4% of conventional loans close
• 76.6% of FHA loans close

As you can see, the risk a VA loan will not close is the same for all other types of loans as well.

MYTH #2: VA loans take longer to close

If you take a look at the same report from earlier, you can see the average days it takes to close a loan from January through July 2021 are...

• VA loan — 55 days
• Conventional loan — 49 days
• FHA loan — 55 days

As you may have noticed, VA loans only take six days more on than a conventional loan on average to close. On the other hand, the days needed to close a VA loan are the exact same as an FHA loan.

This shows VA loans do not take a significant number of days longer to close. However, if you’re worried about the difference, be sure to make a competitive offer on the house you want. Then, those extra 6 days it may take to close the loan will not even be a consideration for the seller.

MYTH #3: VA appraisals take too long and tend to undervalue homes

All appraisers aim to establish a fair market value for any house they inspect, regardless of the type of loan involved. Any appraiser that deliberately undervalues a home on the basis the buyer wants to use a VA loan (or for any reason, really) is corrupt and immoral. Period.

As for the length of time it takes for a VA appraisal to be completed, it can take longer due to an extra step the appraiser is required to take. However, the amount of time that may be added on is greatly exaggerated. After all, Veteran United reports an appraiser usually uploads a compilation of comparable sales and property condition within 10 business day of on average.

So, what is that extra step? Well, the appraiser’s report has to be reviewed by the VA or a specialist employed by the lender.

This in-and-of itself can add time, but, as mentioned earlier, the number of days a VA loan takes to close on average shows that the time it takes to complete an appraisal is insignificant.

MYTH #4: VA loans require sellers to pay for the buyer’s closing costs

Let’s debunk this myth straight out of the gate. While there are some closing costs that a VA loan borrower cannot be paid, the lender usually resolves them.

A seller cannot be forced to pay for any borrower’s closing costs, no matter what type of loan they have.

However, there are states where it’s traditional for sellers to cover closing cost for the buyer. There are also buyers’ markets where some buyers will include closing costs into their negotiations. Persuading a buyer to pay for those closing costs, on the other hand, is harder.

This misconception is a persistent belief amongst some realtors to this day, which is why it’s important to hire a real estate agent that is also considered a VA loan expert. They may be able to help clear up any misunderstandings with your seller and their agent, clearing the way for your offer to be accepted.

Discover if you qualify for a VA loan today.

VA Home Loans FAQ

Can a seller discriminate against a VA loan?

While there a laws that ban discrimination on housing, none cover mortgage types. So a seller may choose another offer with a different mortgage type if they want to.

Do VA loans cause trouble for sellers?

Once upon a time, VA loans were difficult for sellers. However, the rules around VA loans were changed to make things easier for sellers.

Does a VA loan take longer to close?

VA loans take only 5 to 6 days longer than a conventional loan on average. However, it can move faster for some VA buyers.

Do VA loans cost more for sellers?

No. Unless a sellers chooses to cover certain closing costs, they are not required to pay for any of the buyer’s closing costs.

Do sellers pay closing costs on a VA loan?

For a seller to pay closing costs, they would have to agree to do so. There are instances in the market a seller may do so as an incentive for a buyer. However, it is unlikely in today’s market for a seller to do so.

What do sellers have to pay for on a VA loan?

Again, a seller does not have to pay for anything on a VA loan. A lender will usually take on anything a buyer cannot be charged in the closing costs.

Do VA appraisers undervalue homes?

An appraiser is required in their job description to determine a fair market value for a home, no matter what mortgage loan is involved. Furthermore, there is no evidence that those appraising homes for VA loans deliberately undervalue a home’s worth.

Are VA loans harder to close?

On average, VA loans close at nearly the same rate as conventional loans, and at better rates than an FHA loan.

How strict is a VA home inspection?

While there is no specific VA home inspection, a VA appraisal has restrictions to ensure a VA borrower does not a buy a home that is not safe, structurally sound or sanitary.

What should I do if a seller rejects my VA loan?

Once a seller turns down your VA loan offer, it’s highly likely another buyer’s offer has been accepted. To improve your chances of putting in a winning offer, we recommend getting a buyer’s agent with VA loan expertise and choosing a lender that’s accessible to listing agents.

Discover Whether a VA Home Loan is the Smart Choice For You

When you consider the long list of benefits and realize the myths that prevalent in the housing market are just that, myths...

You’ll recognize that getting a VA home loan can help save you money short-term and long-term.