The front of a condo complex with an American flag

5 Common Myths About VA Loans

VA loans are an incredible benefit for active duty military and veterans. The financial perks are unparalleled as they offer no down payment or PMI (private mortgage insurance). This often makes it easier for military families to settle into new homes quicker and at competitive rates. Some say VA loans seem too good to be true, but once you know the ins and outs of the process, the reality of their attainable benefits is evident.

These loans can be a huge asset to military families who take advantage of them, but it’s important for those families to understand how they work. So, why are there often myths floating around about VA loans? With many specific rules and regulations, active duty military and veterans can be easily deterred from pursuing these loans. Working with a lender like MHS Lending who specializes in VA loans can help you navigate these loans effectively and efficiently. We’ve debunked some of the most common myths about VA Loans to set the record straight. 

1. You can only use the VA loan once

Often buyers think they can only use their VA loan benefits once in a lifetime. You can actually use it more than once. Some use this loan to purchase their starter home and then later upgrade. Others use their VA loan to refinance their home and cash out equity. While you can use it more than once, there are some rules to follow.

Once you have paid off your mortgage or sold your home, your VA loan is available again for immediate use. “Paying off” your loan can also refer to refinancing your VA loan into a conventional loan. A lesser known rule allows you to have multiple VA loans at the same time. In order to do this, the amount of the combined home prices on the VA loan must be less than the County Loan Limit. You can then use the remainder of your eligibility to purchase another home with no down payment.

There is a requirement of VA loans that they must be your primary residence for at least the first year. But after that point, you are free to take advantage of the rest of your VA entitlement! Another great benefit of the VA loan is that there is no prepayment penalty. This means you are able to pay off your loan early without any extra fees or interest. If you pay off early, you can set yourself up in a great position to purchase another home using the VA loan benefits. 

Army Veteran VA loan experience with refinancing

Army veteran Brock purchased his home with MHS Lending when he was on active duty. He and his wife were looking to refinance their home but were anxious to do so due to the uncertainty of being relocated to a new base. Brock’s wife Sydney was pregnant with twins and they were looking to cash out equity and start college funds. The team at MHS had their back and worked diligently to get them an awesome rate at the right time.

“The team at MHS Lending was extremely helpful during the entire loan process. They understood our situation with the military and the fact that we would not necessarily remain in our home for a long period of time. This posed a challenge for refinancing our home and we really relied on MHS for advice. When the market was not right for our situation, they let us know. Later down the road when interest rates became lower they reached out to us and we got the process going. They were always happy to answer our questions, even outside of business hours, and we had a great experience!” 

2. You can only buy a single-family home with a VA loan

It is true that not all properties qualify for a VA loan. While there are restrictions on the type of home you can purchase, they are there for your protection and still offer you great home options. A rule of thumb is the property should meet the “3 S Rule” (safe, sound and sanitary). This eliminates properties like “fixer-uppers”, RV’s, and houseboats, but keeps condos, town homes, and other sound properties in the running. 

Because the government is backing 25% of your loan (giving you no down payment or PMI), they have guidelines on property qualifications. Buying a condo or townhouse can be a bit trickier, but they are not necessarily ineligible. These types of homes must be on the VA’s approval list. With this requirement, the VA is looking out for the best interest of the home buyer. It specifically looks to make sure the homeowners association isn’t in any legal trouble and has enough money to complete any repairs needed later down the road.

If you’re looking to build your dream home from scratch, you might think you can’t take advantage of a VA loan. This isn’t necessarily true. While certain conditions apply, you may be eligible to utilize your VA loan to build from scratch. The best way to go about this is to work directly with a lender who has extensive experience working with VA loans.

Click here to request more information about the VA Home Loan
Want to fast track your approval?
Start with an Instant Prequalification.


3. There’s a cap on how much money you can get with a VA loan

Many believe that you are limited on the amount of money you can get with a VA loan. Although it is true there’s a limit on the amount the VA guarantees, there is no set VA rule stating how much of a loan a veteran can get. If you’re looking to buy a home that goes above that, you can definitely get a higher loan which is known as a “Jumbo Loan”. In these loans, a down payment will likely be required.

How this works is, the VA will guarantee (insure) up to 25% of a home in the County Loan Limit. The buyer is required to put down one quarter of every dollar beyond that amount. If you have the means to fund the down payment above that County Loan Limit, you are able to take advantage of the “Jumbo Loan”. With this you can reap the benefits of the VA loan and pay a fraction of what a traditional down payment would be on your dream home. The VA website further breaks this down into VA home loan limits and entitlements. 

4. You need a credit score higher than 700 to qualify

One of the most common myths regarding the VA loan is regarding credit score requirements. In reality, the VA has no credit score requirements since they are not the ones lending the money. The lenders and banks that give VA loans are the ones who set credit score standards and are often more lenient when it comes to these loans. For VA loans, most banks and lenders require at least a 620 credit score. This is well below the myth of 700 or higher.

5. Reserves or National Guard members aren’t eligible

Last, but not least, let’s tackle who’s eligible for VA loans. Many people believe that only active duty military and veterans are eligible for these benefits. In actuality, there are a few other distinct groups also eligible for VA loans. These include members of the Reserves or National Guard, and surviving military spouses. 

For members of the Reserves or National Guard, the requirements differ from active duty. The VA states that in order to qualify, you must have completed 6 years honorably. Another way to qualify is if you were activated on Title 10 orders for a period of 90 consecutive days. Finally, if you were discharged for a service-connected disability you may be eligible. 

Don't let these myths about VA loans keep you from the substantial benefits millions of military families have taken advantage of. It’s important to understand the process of obtaining a VA loan, which is why our team of experts created our VA Home Loan Seminar. This seminar gives you everything you need to know to make your VA home loan experience as seamless as possible. You can take it online at your own pace and even save money in your home buying process. We know VA loans can be confusing, and our free seminar gives you the tools you need to feel confident when buying your dream home!

Click here to request more information about the VA Home Loan
Start with an Instant Prequalification.