Skip to content

What Most Borrowers Don't Know About VA Loans

Being eligible for a VA loan is a great privilege for many prospective homeowners seeking financing. Everything is made easier, affordable, and flexible compared to conventional loans.

Let’s consider 10 things you may not have known about VA loans that might change the way you view these loans.

1.  No Down Payment or Mortgage Insurance

Unlike conventional loans, VA loans don’t require a down payment and personal mortgage insurances (PMI). What does this mean? First, this indicates you can buy a house much quicker since you don’t have to wait until you have enough savings for a down payment. Next, without PMI, your monthly payments will be lower.

2.  You Can Use Your Benefits Many Times with No Expiry

Once you fully repay a VA loan, you can borrow again. In fact, you can keep borrowing more and more, provided you pay each time you borrow—this benefit has no expiry.

What if you have an existing VA loan, can you qualify for a second one? Here’s the good news! You can still get a second loan. Keep in mind, the second loan must be for primary residence only.

Second loans are given based on remaining entitlement. The government only guarantees up to 25% of your loan subject to current loan limits. In 2021, the limit is $548,250. This means the government guarantees up to $137,062 which is 25% of the loan limit.

So, if you take a loan of $250,000, the guarantee is $62,500. This means you still have a remaining entitlement of $74,562 ($137,062 – $62,500). The amount of loan you can take without a down payment is four times the remaining entitlement.

3.  Surviving Spouses Eligible

Surviving spouses of veterans and servicepersons may be eligible for VA loans. All you need is a certificate of eligibility (COE) to prove your qualification. Once you have the COE, you’re entitled to VA loans to buy, repair, build, or refinance a house.

4.  VA Loan Rates Are Lower Than Conventional Rates

Since VA loans are government-insured, they’re considered less risky than conventional loans. As a result, lenders are willing to charge a lower rate. On average, the VA loans’ rate is 0.25% lower than conventional loan rates.

5.  You Can Refinance A VA Loan

Just like conventional loans, VA loans can be refinanced. This involves replacing the older loan with a new one that has better terms. Most borrowers refinance to take advantage of lower interest rates. But you can also refinance to get some cash. This is called cash-out refinance and it involves tapping into your home equity.

6.  Foreclosure, Low Credit Scores, and Bankruptcy Do Not Disqualify You

The VA does not set a minimum credit score for a loan. This responsibility is left to the lender. So, you can still qualify for a VA loan even with a lower credit score.

If you have gone through bankruptcy and foreclosure, you can still get VA loans in the future. All you have to do is establish a clean credit record for two years after discharge from bankruptcy or foreclosure. From there, you can apply for a new loan.

7.  Funding Fee Can Be Waived

A Funding fee is a loan percentage you pay to the VA when you take or refinance a VA loan. This fee helps to keep the program running.

However, if you have a service-connected disability, or you’re a spouse of a veteran who died in service, you’re exempted from the service fee.

8.  You Can Buy a Condo with A VA Loan

A condo can be a good option for single persons’ and those with a limited budget. Fortunately, you can buy a condo with a VA loan as long as it’s VA-approved. You can find VA-approved condos through a VA-savvy agent, your lender, or the VA’s website.

9.  You Can't Buy Land

VA loans are intended for home buying, not land. However, you can buy a farm as long as that farm has a home that you intend to use as a primary residence.

Home and barn on the farm fields and rolling hills

10.  VA Loans Are Assumable

This means that the VA loan is transferable to a subsequent home buyer. If you decide to sell your home before fully repaying your mortgage, a VA-eligible buyer takes over all liabilities from the unpaid mortgage.

If you took a VA loan when interest rates were at rock-bottom, you can transfer that loan at the same low interest rate despite the prevailing high rates. This benefit attracts homebuyers who find it cheaper to assume a loan than take a fresh mortgage at the current rates.

Unbeatable Benefit

Considering all the above benefits, it’s clear there’s no other loan program quite like the VA loan. It provides unbeatable benefits to those who devoted their lives to serving the country.

Find The Right Mortgage

For more than 20 years, Phil have been helping customers achieve their home purchase and refinance goals by providing them with invaluable resources and support.

Schedule a FREE Consultation
Phil Ganz

Subscribe to Get Your First Time Homebuyer Checklist

Sign up for the weekly newsletter to stay up to date on the latest real estate market trends, loan news, and so much more!