The real estate industry comes with its share of pitfalls, but loans backed by the Department of Veterans Affairs are not among them.
However, many home sellers are still wary of taking offers with VA loans. Whether it's due to old myths or modern misunderstandings, it's possible that both buyers and sellers are missing out on potential opportunities.
For buyers, the most immediate benefit of a VA loan is a severely reduced down payment (if one is required at all). Veterans do not have to put a down payment on the price of a house up to a certain limit. These limits vary by location, but tend to cover the bulk of the cost if not the whole price.
Sellers who are wary of accepting VA backed loans are skipping over a significant portion of potential home buyers.
1. Average close time. Many people believe that VA-backed loans take longer to close than other types of loans, but this isn't the case. This is a huge misconception, VA loans actually take the same amount of time to close when compared to FHA and Conventional loans and often times close a lot sooner because the underwriting process is more streamlined then FHA and Conventional loans.
2. Smooth qualifying process. VA backing means everything is put on the table: there are few surprises when it comes to these loans. If you've done your homework, everything should go smoothly. You shouldn't expect misdirects or foul-ups.
3. Wide appeal. VA loan limits are fairly high, and veterans are absolutely allowed to purchase homes that surpass them. While some homes might be financially out of reach for VA backing, they are few and far between.
4. Lower credit requirements. If you're hesitant to engage in a big financial commitment because of a spotty credit history, fear not. VA backed loans usually require a credit rating of 525 compared to the average 620 needed for most other loans.
5. Increase in buyers using them. With the drawdown of operations in the Middle East, veterans are flooding consumer markets, including real estate. Between 2007 and 2016, VA loan use increased by 370 percent. That much growth means that both sellers and buyers are becoming more aware of how VA loans work.
Loans backed by VA might make a few buyers and sellers leery, but don't let bad information fool you. They make purchasing a home a much more realistic option for many veterans, and they're only increasing in popularity.