If you’re an active-duty service member or veteran considering buying or refinancing a home, you’ll probably hear some differing opinions on VA loans as you shop around for lenders and Realtors.
There are a number of misperceptions about the home loan benefit — myths that Veterans Affairs Department officials continually try to bust.
“Perhaps the largest [misperception], the one that we hear about most frequently, is that it takes too long to close a VA loan,” said Mark Connors, lender liaison for the VA Loan Guaranty Service. “We just don’t see that. The data we have doesn’t show that at all.”
Connors pointed to data from Ellie Mae, a cloud-based platform provider for the mortgage finance industry. The company provides data on a variety of aspects of mortgage lending on a monthly basis. According to the Ellie Mae Origination Insight Report, in September, the average time to close a loan for all loans was 43 days. For VA loans, it was 47 days. For conventional loans, it was 42 days. That trend has held fairly steady over the last two years, with about a two- to four-day difference.
The average time to closing has decreased for all types of loans compared to a year ago. VA loans in September 2016 averaged 51 days to close, for example.
Another misperception, Connors said, is that the seller has to pay all the closing costs on a loan. If that were true, it would put a veteran at a disadvantage, especially, for example, when a seller is considering multiple offers on a house.
“The closing costs are definitely not all paid by the seller,” Connors said. “The law limits the closing costs the veteran is able to pay, but we want to get the word out that with a VA loan, the seller is not required to pay all of the closing costs.
“But the VA home loan program protects veterans from being overcharged on loans. The law specifies the fees and charges that the veteran is allowed to pay.”
Veterans purchasing a home pay a VA funding fee ranging from 1.25 percent to 3.3 percent of the loan amount, and the funding fee can be included in the loan. Some groups are exempt from paying the funding fee, such as veterans receiving VA disability compensation.
In recent discussions with a large mortgage broker, Connors said, “anecdotally they feel that a lot of the decisions the seller makes can be formed by what they hear from the listing agent. Education is an ongoing thing we do every day, not only at the central office but in the field, as well.”
Another point that can confuse some first-time program users: Lenders, not the VA, set interest rates, discount points and closing costs, and the rates likely vary among lenders. So it’s best to shop around.
“I’d encourage shopping around for at least two, preferably three lenders,” said Greg Nelms, chief of loan policy for the VA Loan Guaranty Service. He encouraged veterans to contact the regional loan centers and ask for advice on questions they should ask potential realtors and mortgage loan officers, based on their own financial situation.