VA Home Loan Myths, and the Truth, This Veterans Day

I come from a family of veterans. My dad served in the Air Force during the 1970s, and my brother served during the Iraq and Afghanistan wars. So Veterans Day is not just a date on the calendar at my desk.

I work just as hard for every client who sits down with me. That's how this shop runs, and that won't change. But when the borrower across the table has served, there's a little added appreciation on my side of the table. I think about my dad and my brother, and I want to get it right.

Getting it right starts with clearing out the myths. I've been in mortgages since 2003 and founded Sunview Lending in 2015, and I still hear the same bad information about VA loans almost every week. Here are the big ones, checked against VA.gov.

Myth 1: "You still need a down payment"

In most cases, you don't. VA says a VA-backed purchase loan often comes with no down payment, as long as the sales price isn't higher than the home's appraised value. Your lender still has to approve you on credit, income and debts, and you have to live in the home. But zero down is real, and it's the heart of the benefit.

Myth 2: "No PMI just means they hide it somewhere else"

There's no monthly mortgage insurance on a VA loan. No PMI and no FHA-style MIP. What there is, in most cases, is a one-time VA funding fee. VA says that fee exists because the program doesn't require down payments or monthly mortgage insurance. You can pay it at closing or roll it into the loan.

Here's the current chart for purchase loans, effective April 7, 2023:

• First use: 2.15% with less than 5% down, 1.5% with 5% or more, 1.25% with 10% or more
• After first use: 3.3% with less than 5% down, 1.5% with 5% or more, 1.25% with 10% or more

The fee is figured on the loan amount, not the purchase price.

Myth 3: "Everybody pays the funding fee"

Not true, and this one matters a lot. VA says you won't pay the funding fee if any of these apply:

• You receive VA compensation for a service-connected disability
• You're eligible for that compensation but receive retirement or active-duty pay instead
• You're a surviving spouse receiving Dependency and Indemnity Compensation
• You're a service member with a proposed or memorandum rating before closing that says you're eligible for compensation from a pre-discharge claim
• You're on active duty and show proof of a Purple Heart on or before closing

If you're later awarded compensation with an effective date before your closing, you may be eligible for a refund. Ask me to check your COE before we price anything.

Myth 4: "VA loans max out at a set dollar amount"

If you have full entitlement, VA says you don't have a loan limit, as long as you can afford the payment and the appraisal supports the price. Full entitlement doesn't mean any size loan, though. The lender still decides what you qualify for. If you've used part of your entitlement and still have a VA loan out there, the county loan limit comes into play, and you may need some money down on a bigger purchase. That math is on your COE, and I'm happy to walk you through it.

Myth 5: "It's a one-time benefit"

You can use it again. VA says you can use your VA loan benefit again if you sell or refinance a home you bought with a VA-backed loan. A lot of families I talk to assume they spent it on their first house years ago. Let's pull the COE and see where you stand.

Myth 6: "A VA streamline is always a good deal"

An IRRRL, the VA streamline refinance, can lower your rate or move you from an adjustable loan to a fixed one. You need an existing VA loan, and you certify you live or used to live in the home. The funding fee on an IRRRL is 0.5%, unless you're exempt.

But "streamline" doesn't mean free. VA itself says to divide your closing costs by your monthly savings to see if it's worth it, and to watch out for offers that sound too good to be true. I wrote up the break-even math in detail here: Is a VA IRRRL worth it? The break-even math.

Myth 7: "You can't buy a condo with VA, and the appraisal kills deals"

You can buy a condo, as long as it's in a VA-approved project. Check that early, before you fall in love with the unit.

On the appraisal, VA's Minimum Property Requirements are about making sure the home is safe, structurally sound and sanitary. The appraiser isn't doing a home inspection, and VA's handbook says appraisers shouldn't call for cosmetic fixes or normal wear and tear. If real repairs are needed, the appraisal comes back "subject to" those repairs. That's a roadblock we plan for, not a reason to skip the benefit.

FAQ

Do I need a down payment for a VA loan?

Usually not. VA says no down payment is required as long as the sales price isn't higher than the appraised value. You still need to qualify with the lender.

Is there monthly mortgage insurance on a VA loan?

No. VA loans don't require PMI or MIP. Most borrowers pay a one-time funding fee instead, unless they're exempt.

Who doesn't have to pay the VA funding fee?

Veterans receiving or eligible for VA disability compensation, surviving spouses receiving DIC, certain service members with a pre-discharge rating before closing, and active-duty Purple Heart recipients, per VA.gov.

Can I use my VA loan benefit more than once?

Yes. VA says you can use it again after you sell or refinance a home bought with a VA-backed loan.

Let's talk it through

To my dad, my brother, and everyone who has served: thank you. If you or your family are thinking about buying or refinancing in California, Arizona, Colorado, Florida or Texas, call me and let's look at your actual numbers together. No pressure, just straight answers.

Call 818-452-4993 or email roland@sunviewlending.com. You can also read more on our VA loans page.

Sunview Lending, Inc. NMLS 1408622, CA DFPI 60DBO-45974. Roland Suncire NMLS 1196184.