Buying a home without a down payment or mortgage insurance might sound too good to be true, but those are just two of the key benefits of a VA home loan. Designed for veterans, active-duty service members, and surviving spouses, VA loans offer an affordable path to homeownership.
While it’s true that VA loans help homebuyers save money, the details can be confusing, leading to some persistent myths and misunderstandings. Let’s clear up some of the most common VA loan misconceptions so that you have the facts you need to make confident homebuying decisions.
What is a VA home loan?
A VA loan is a mortgage option from the Department of Veterans Affairs (VA) that offers low interest rates, limited closing costs, and no required down payment to those who qualify. Although the loans are issued by private lenders, the VA guarantees a portion of the loan, which helps make terms more favorable for borrowers. In order to get this loan, eligible borrowers need to first get a certificate of eligibility (COE) from the VA.
Myth #1: You Can Only Use a VA Loan Once
The Truth: VA loans can be used multiple times throughout your life.
As long as you remain eligible, you can use a VA loan for your first home and any subsequent home purchases. You can even have more than one VA loan at a time. This is especially helpful for active-duty service members who may need to relocate multiple times throughout their career.
If a borrower wants to use their VA loan benefit again, they need to apply to have their full entitlement restored. You can do this as long as you have either repaid your previous loan in full and sold that home, had another qualified veteran assume your loan, or repaid the previous loan in full but have not yet sold the home.
However, even if you’ve used your VA loan benefit before and choose not to sell your previous home, you may still qualify for what’s known as partial entitlement. This allows you to purchase a second home with a VA loan, but the VA will only guarantee part of the loan amount. The exact amount is determined by factors such as the county loan limit, the home’s value, and how much of your entitlement has already been used, as outlined in your updated Certificate of Eligibility.
Myth #2: VA Loans Take Too Long to Close
The Truth: The VA loan process timeline is similar to conventional loans.
No one can guarantee exactly how long it will take to close on a VA loan, but when compared with conventional loans, the result is similar. Veterans United, a VA lender, estimates that typical VA loans close within 40 to 50 days, while LendingTree estimates it takes 42 days for a conventional loan to close.
One way to speed up the process is by getting a preapproval. Before you start browsing for homes, gather all necessary documentation, such as bank statements and credit reports, and bring them to your lender. The lender will then check your credit eligibility and overall financial health. If you’re approved, they’ll give you a pre-approval letter outlining the maximum loan amount you’re eligible for.
Myth #3: VA Loans Have Higher Interest Rates
The Truth: One of the biggest benefits of a VA loan is that it often has lower interest rates than conventional ones.
Every lender will offer a different interest rate. However, generally, VA-backed purchase loans have lower rates because they’re considered less risky for lenders due to the VA’s guarantee. In the long term, this helps keep monthly housing costs more affordable for VA borrowers.
With that being said, prospective borrowers should still shop around to find the best rate. Not all lenders have the same requirements, let alone the same interest rates, so it’s worth exploring multiple options to find what works best for your financial situation.
Myth #4: Only Combat Veterans Qualify
The Truth: VA loan eligibility is broad and includes active-duty service members, veterans, Reserve/National Guard service members, and some spouses of veterans.
To qualify for a VA loan, borrowers will have to meet certain criteria depending on their service history. For example, active-duty service members must have served at least 90 continuous days, while veterans may qualify if they served 24 continuous months or at least 90 days and were discharged due to a hardship or other qualifying reason.
Spouses of veterans may also be eligible. This includes unremarried surviving spouses of service members who died in the line of duty, or those who remarried after December 16, 2003, and after turning 57, among other qualifying circumstances.
Former members of other organizations, such as the United States Naval Academy or the Public Health Service, may also be eligible. To see the full list of eligible borrowers, check the VA Buyer’s Guide here.
Myth #5: You Cannot Use a VA Loan to Build or Repair a Home
The Truth: VA loans aren’t just for buying move-in ready homes. They can also be used to finance certain types of repairs and improvements, or even to build a completely new home.
Borrowers may use a VA loan to make approved alterations or upgrades, including energy-efficient improvements through an Energy Efficient Mortgage (EEM). These upgrades must be completed in conjunction with a VA purchase or refinance loan and typically need to be closed at the same time.
If you want to build a new home, you may be able to use a VA construction loan. While these loans are less common and more complex than purchasing an existing home, they can help eligible borrowers finance the purchase of land and the construction of a home. Typically, the loan is closed before construction begins.
Regardless of your real estate plans, be sure to read the requirements carefully before using a VA loan. While loans can be used for a variety of properties, including manufactured homes and condos, some restrictions apply.
Thinking about buying your first home or relocating with your family? A VA loan could be your key to affordable homeownership. Work with an agent who understands your benefits and knows the local market.