Disadvantages of VA Loans [VA mortgage loans]

VA loans [va mortgage loans] are some of the best loans on the market for military veterans. However, as beneficial as they are, some disadvantages may mean it’s not the right financing solution for you. Here are some important facts to take into consideration.

Common Problems with VA Mortgage Loans

Despite the benefits of VA loans, such as low down payments and no private mortgage insurance, there are some aspects that are difficult for both buyers and sellers to digest. Here are some of the problems and disadvantages involved with VA mortgage loans. 

VA Funding Fee

With every VA mortgage loan, there are certain fees. While you can negotiate the lender’s portion of it, there is no negotiating the funding fee that the VA charges. This fee can range from about 1.25% to well over 3%, depending upon how much you are putting as down payment, etc.

Some Sellers Don’t Want VA Buyers

While closing costs are lower, the value of the loan may exceed the fair market value. This has led to an undercurrent of hesitation when it comes to dealing with VA buyers. However, automated underwriting is helping the situation somewhat.

Lender Overlays

Lenders often have additional requirements for borrowers to protect their investment.

This is because, in reality, the VA only covers 25% of the loan. The most straightforward lender overlays include a minimum credit score, debt to income ratio, etc., but they may also impose restrictions on what kind of property you can consider.

Lender Limits

Starting in 2020, there are no limits on borrowing as far as the VA is concerned. But that doesn’t stop private lenders from imposing lending caps.

Closing Costs Are Not Covered

VA home loans do not cover closing costs. Therefore, you should have money to cover processing and closing costs, outside of the loan.

VA Mortgage Loans Take Longer

VA loans may require slightly longer to close. However, the difference is not more than a couple of days to a week.

Appraisals

Often, you have to get the property you want to purchase appraised and you don’t have much of a say in the process. Your loan will depend on this appraisal. 

Find the Right Financing Solution for You

The expert loan officers at Mortgage Solutions Financial can help you determine if these disadvantages outweigh the benefits of a [VA mortgage loan] in your situation. Contact us today to learn more.