Dumb Question
A friend of mine, when he was a young man, had the chance to go on a tour of a Catholic seminary, which is a school where men train and prepare to become priests for the church. A young priest in training was asked to be my friend’s tour guide, and the two immediately fell into a pleasant conversation about the seminary and what takes place during a regular day. At some point, my friend subconsciously decided to leave his brain at the coat check and ask his tour guide, “So, what was your reason for wanting to become a priest? Was your father a priest?” The young priest-to-be was very gracious and just smiled, and then he said, “No. We take a vow of celibacy as priests, so that would not have been possible.” Not one of my friend’s brighter moments, that’s for sure.
With the same graciousness that the priest-to-be displayed in the face of a less-than-enlightened question, I hope to address some questions and misconceptions about VA loans that exist but shouldn’t.
Myth #1: VA Loans are not a great option for a buyer
Truth:
– No down payment required
– No private mortgage insurance required
– Higher allowable debt-to-income ratio
Myth #2: You can only use your VA eligibility once; use it and lose it
Truth:
– It’s possible to have more than one active VA loan at the same time
– Use it as often as you wish (with some restrictions)
– Losing a VA loan to foreclosure doesn’t mean you’re no longer eligible
Myth #3: VA Loans have much slower turn times, too much red tape
Truth:
– VA Loans close in 30-45 days like most other loans
– All VA-approved lenders do their own underwriting now
Myth #4: There’s no such thing as a Jumbo VA Loan
Truth:
– Yes, there is. Borrower must bring 25% of the amount over the $417K limit
Example
– Loan amount is $500K, which is $83K over the $417K limit
– 25% of $83K is $20,750
– $20,750 = 4.15% of $500K, MUCH less than a 20% down payment
So, let me summarize why buyers AND sellers should LOVE to have a VA loan as part of the transaction:
• No Private Mortgage Insurance – the buyer can afford a higher monthly payment
• Higher allowable Debt-To-Income Ratio – this EXPANDS the base of buyers who can qualify to purchase the home
• No Down Payment (when the loan is at or below $417K) – another obstacle removed from the loan-approval process
The next time you hear someone say, “I hear VA loans just aren’t worth it,” just smile and educate.
