When you’re working with veterans or military borrowers to help them purchase a home, they are privy to amazing benefits like no down payment and no mortgage insurance. However, only 9% of the 25 million veterans living in the United States have taken advantage of a VA loan. There is a large opportunity to serve this amazing community of people and help them purchase a new home or refinance their current home loan – we just need to help them see the true value of the benefits they qualify for.
Myths and misconceptions have been circulating in the industry for decades on VA loans, but when done properly, a VA loan has the opportunity to provide all parties involved with a number of worthwhile benefits.
Caliber Home Loans, Inc. has established an expert VA and military team that actively works to dispel the common myths we hear, educates brokers on the proper ways to handle these types of loans, and better explains the rules and regulations associated with them.
While borrowers of all types can have good or bad credit, the average veteran’s credit score is over 700 and has substantial savings in the bank. According to Pew Research, “Households headed by veterans have higher incomes and are less likely to be in poverty, on average, and this is especially the case for veterans in racial or ethnic minority groups and those with less education.”
Whether a person is a veteran should not deter brokers from pursuing a VA loan, as the program was originally designed to provide a benefit to our veterans, not to hinder homeownership.
When working with a VA loan, there are two key benefits awarded to the veteran: they don’t need a down payment and there are closing cost limits. When this type of loan is structured properly, the seller will never have to pay for the veteran’s closing costs. Therefore, it’s important to work with seasoned brokers familiar with how to structure a VA loan.
This myth developed from what were considered “allowable” and “unallowable” charges for a veteran, which are different from closing costs. Looking back nearly 30 years, realtors pushed their sellers to pay closing costs for veterans, which is why this myth is still so prominent today.
The reality is that the lender cannot charge a veteran more than 1% of the loan amount in fees, and all remaining balances must be added to the loan itself – versus having a seller pay the difference.
While there is a maximum VA loan guarantee, there is not, nor has there ever been, a maximum loan amount. A veteran also can get a loan that is higher than the maximum conventional loan limit for an area.
The VA loan guarantee exists as a layer of protection should a veteran default on their loan, in which case the VA will pay the lender up to 25% of the loan amount, depending on the loan type. Part of the reason for the confusion around VA loan limits is county loan limits. Even though there may be a cap on conventional loans in an area, VA loans don’t follow the same rules.
This myth has been perpetuated due to not fully understanding how to structure this type of loan. While it’s true that VA loans may be complicated, it’s only because they are not common. With 91% of veterans not taking advantage of this benefit, it’s not a surprise that it’s become an underserved and misunderstood market.
The truth is that VA loans may be easier to be approved and processed than their Fannie Mae and Freddie Mac equivalents. And, Caliber’s team provides support for questions brokers may have, as well as one of the biggest hurdles a broker may face: obtaining a Certificate of Eligibility (COE) for their veteran or military borrowers.
Knowing is Half the Battle.
Our deep experience with VA and military loans helps us better serve those who’ve served our country. We invest in brokers like you by providing exceptional resources, support and training to help you grow your business. Partner with us today.