VA Loans Explained - Common Misconceptions and Questions
VA loans are a great alternative for Service Members and Veterans to obtain a mortgage with a 0% down payment. As a military spouse and now a Realtor® that works with military home buyers and sellers, I see many misconceptions when it comes to VA loans, so I have summarized a few of them below in hopes to provide some guidance. Keep in mind the VA product changes constantly and it is always recommended to talk to a lender to clarify any questions regarding your loan. The below is simply a REALTOR® perspective and it should not be considered financial advice.
If I use my VA loan I do not have to bring any money to the table at closing
This is not necessarily true. While the VA loan is a 0% down payment product, there can be additional loan-associated costs incurred that might need to be paid at closing in addition to appraisal, inspection and other out-of-pocket costs. A lender can always share a fees worksheet with estimated cash to close. You can check out our video below that explains what cash to close means:
2. The VA has tougher appraisals
In my experience this is not true. The VA loan, like any other loan, requires an appraisal to ensure the collateral (the property) is worth the amount specified on the contract. Just like any other government backed loan, the VA loan requires for the property's appraised value to meet the purchase price. If the appraisal value does not meet the purchase price, the buyer does have the ability to terminate the contract and get the earnest money refunded if buyer and seller cannot reach a new agreement. Any appraiser, however, bases his/her opinion on market comparables around the area for any type of loan. So just because a contract might have a VA loan attached to it, does not mean lower-priced comparables will be considered.
What is a WDI report?
WDI stands for Wood Destroying Insect report. This report is one of the biggest differences between a VA loan and other loans. The VA loan requires a WDI report to be completed on the property. This inspection is usually done by a pest control company or a general inspector that is certified to perform it and it looks for any conduits for wood-destroying pests including but not limited to termites and carpenter ants. These items include but are not limited to: wood rot, foliage from trees or shrubs touching the property, high soil around the foundation and the presence of wood destroying insects. Anything on this report, does need to be remedied before the transaction closes and most lenders require a clean report to be delivered after repairs/remediation. Traditionally the repairs are performed by the seller.
Can I use my VA loan more than once?
The short answer is YES. How much eligibility is left will depend on you already owning a property with a VA loan as well as how much you qualify for. A lender can guide you in the right direction when it comes to how much there is left on your VA loan eligibility. Keep in mind that depending on how many times you have used your VA loan, your VA funding fee changes as well. That is also a great question to ask a lender.
VA loans have no cap
The answer is yes and no. A few years ago, the cap for first time home buyers or buyers that don't have any of their eligibility tied up on a property was lifted. However, buyers are still tied to approval and amounts they qualify for from a debt to income ratio standpoint.
Do you need to chat with a lender?
Be sure to visit www.mynestsa.com and we can recommend you to one of our amazing lender partners for some guidance on your upcoming purchase and how you can use your VA loan.
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