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. Here are four common VA loan myths that are incorrect.
1. VA Loans Feature High Note Rates
Reality: VA loans offer a consistently lower note rate over 30 years than conventional loans. Mid-December 2022 showed a 6.14% 30-year note rate for VA loans compared to 6.60% 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 VA, VA loans are closing more frequently by a wide margin. 73% of VA loans closed compared to 67.9% of conventional loans and 61.5% 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. 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: 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.
With this type of massive growth, the VA loan is a serious mortgage contender and definitely worth a veteran's time to research.
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