What you don’t know about Idaho VA Home Loans can hurt you--and your wallet.
Respect and appreciation for the military is a cornerstone of American life, and the Department of Veterans Affairs exists, in large part, to facilitate ongoing programs and care for veterans following their service. One of the most valuable perks of military service is the VA Home Loan, a mortgage product that helps members of the military and veterans purchase their homes with favorable terms and no down payment.
Originally an outgrowth of G.I. Bill, VA Loans were created to help returning World War Two soldiers readjust to civilian life by offering them the opportunity to buy a home with no money down and easier financing. The housing boom (and Baby Boom) that resulted changed the real estate market forever, giving rise to massive suburban development and helping to boost the middle class by making homeownership more affordable.
Since then 18,000,000 loans have been provided through this program to help veterans with the purchase of homes, farms, and businesses. Changes to the program in 1992 made it available to Reservists and National Guard members as well, further expanding the program.
However, because it is such an old program, other changes that have occurred over the years have resulted in confusion about the terms and availability of the loans. Also, more than 1 in 3 veterans polled said they didn’t even know about the benefit. Here are a few myths about VA Loans and the real deal information you need to better understand this valuable option.
Myth #1: You can only use a VA Home Loan once
This is the most pervasive VA Loan myth, and the one that keeps many veterans, especially older veterans, from taking advantage of the program. Originally, the VA Loan was a one-and-done product, but that has not been true for many years. Once you earn the VA Loan, it’s yours for life.
You can qualify for more than one VA Loan at a time. You can even be eligible if you have previously lost a house to foreclosure that was financed with a VA Loan. It is literally the gift that keeps on giving.
Learn more about eligibility requirements on the VA website.
Myth #2: Because it’s a $0 down loan, it’s risky
Statistically, the VA Loan is the safest loan product on the market. Although buyers under this loan don’t start out with equity in the home, that doesn’t mean they are making a risky decision. Because the VA loan process uses sound appraisal and income requirements, Buyers are often better qualified than under traditional low-money-down programs.
In addition, all VA Loans are tracked through a program called Loan Guaranty Service which monitors the status of veterans mortgages to ensure that they head off any financial difficulties and negotiate with lenders when necessary to avoid foreclosure. This has been remarkably effective, resulting in assistance to more than 320,000 veterans since the housing meltdown of 2008 and helping to prevent more than $11 billion in foreclosures, according to the Department of Veterans Affairs.
Myth #3: The VA home appraisal is unreasonably stringent
VA appraisers ensure that the property being purchased conforms to Minimum Property Requirements (MPR) which means that major systems and structural elements must be sound and in good repair. For most homebuyers, these would be the same requirements they would expect in any home they purchase--sound plumbing and electrical, adequate roof and HVAC, no termites, etc.
The only way in which this might present a problem is if a veteran is seeking to purchase a fixer-upper with significant damage or structural shortcomings. The VA Loan is designed to fund secure housing in good repair for the veteran and their family to occupy and isn’t set up for fix and flip investment or extensive rehab before occupancy.
Sidenote: There is a way to finance investment property using a VA Loan. Borrowers can use a VA Loan to purchase a multifamily property with up to four units as long as they plan to occupy one. They can then use the other units as investment properties. Again, however, the property must meet the MPR requirements of the VA appraisal.
Myth #4: VA Home Loans are limited to small, inexpensive homes due to unrealistic caps
VA Loans are surprisingly smart about adjusting to areas where homes are more expensive than the national average. While the VA Loan is generally available at no money down for Idaho single-family homes up to $453,100, there are also individual county caps in areas with more expensive average home costs. This means, for example, that a VA borrower in a higher priced county like Blaine, Camas and Lincoln can finance up to $625,500 at the same 0% down due to the higher average home costs in that area.
For those purchasing a home that is more expensive than their area’s VA cap, a 25% down payment is required only on that portion of the home cost that exceeds their local cap. Thus, a borrower can pay $11,725 to purchase a $500,000 home in an area where the standard cap ($453,100) applies. Compare that to the $46,900 that would be required on a 20% down conventional loan.
If you are looking for an agent who is experienced with the VA home purchase process, look no further. At We Know Boise we are here to help demystify the process and help you find the right lender, resources, and, of course, the right home for you. Contact us today to get started.