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Five Myths About California VA Loans, and the Truth Behind Them

Surveys have shown there are many misconceptions and misbeliefs relating to VA loans. And that’s unfortunate, because a lot of people who are well-qualified for this program might not apply due to misinformation they read online.

For example, one of the biggest myths is that all borrowers who use a VA loan in California have to make a down payment. So let’s start by debunking that one…

Myth #1: California VA loans require a down payment.

This is inaccurate. In many cases, VA loans do not require any down payment at all. That’s one of the primary benefits this program offers for California home buyers.

As it states on the Department of Veterans Affairs website:

You don’t need a down payment. None whatsoever. Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down. That’s up to $12,500 on a $250,000 home purchase. With a VA loan, you can buy immediately, rather than years of saving for a down payment.

Granted, there are some rare cases where a home buyer in California might be required to make a down payment. For instance, a person who has used a VA loan in the past and still owns the home might have to make a down payment if their next loan exceeds a certain limit.

But in the majority of cases, eligible home buyers in California can use a VA loan with no down payment. Many borrowers can finance 100% of the purchase price, shortening the path to homeownership.

Myth #2: They take a lot longer to close.

Another widespread misconception has to do with the closing timeline and closing success rate for VA loans, compared to conventional mortgages. Many people think that California VA loans take a lot longer to close, due to additional “red tape” from the government.

But this one’s not necessarily true either. In fact, statistics have shown that VA loans can close as quickly as conventional (non-government-backed) mortgage loans. And they actually have a better closing rate, which means a higher percentage of borrowers reach the finish line.

Myth #3: I can only use this benefit once.

This too is inaccurate. The truth is, California veterans and service members can use their VA home loan benefits more than once, as long as they continue to meet the eligibility criteria.

We have worked with many home buyers in California who’ve used VA loans repeatedly over the years. It’s a lifetime benefit that you can use over and over, as many times as you like.

Myth #4: The VA lends money directly to borrowers.

This is another common misconception regarding California VA loan. Some borrowers believe that the Department of Veterans Affairs lends money directly to borrowers, which is not true.

Instead, the VA guarantees a portion of the loan provided by private lenders, such as banks and mortgage companies. This guarantee encourages and allows lenders to offer favorable terms and conditions to eligible borrowers.

When you apply for a VA loan in California, you will submit your application through a bank or mortgage lender in the private sector. In this way, VA loans are just like FHA and conventional mortgages. The difference has to do with the government-provided guarantee.

Myth #5: I need to have excellent credit to qualify.

As we’ve written in the past, VA loans are one of the easiest types of mortgage loans for California home buyers to obtain. And we touched on the primary reason for this above.

As a government-backed mortgage program, VA loans reduce some of the risk that lenders face. This in turn enables lenders to be more flexible when it comes to approving borrowers.

Having excellent credit could help you secure better terms and a lower mortgage rate. But it’s not an absolute requirement for VA loans. Borrowers in California who get turned down for a conventional mortgage due to a low credit score are often able to qualify for a VA-guaranteed home loan.

Even if you’ve had credit-related issues in the past, a California VA mortgage lender might be able to help. So don’t let your current credit situation deter you from applying to the program. You have nothing to lose and a lot to gain.

5 Helpful Facts About California VA Loans

We’ve covered a lot of important information in this article. So let’s wrap up by summarizing some of the most helpful facts about California VA loans, and how you can benefit as a borrower.

  • VA loans allow you to finance up to 100% of the purchase price, eliminating the need for a down payment and shortening the path to homeownership.
  • VA loans do not require mortgage insurance, which is typically required for conventional loans with a low down payment.
  • You can use your VA home loan benefits repeatedly over the years, as long as you pay off the mortgage debt in full each time and maintain eligibility.
  • Borrowers in California who use a VA loan can also use gift money from an approved third-party to help cover their closing costs.
  • Borrowers who use VA loans have a relatively high closing success rate when compared to other types of mortgages.

Have questions? Bridgepoint Funding specializes in California VA loans and can answer any questions you have about the program. We can also help you complete some of the preliminary steps in the process, such as obtaining your Certificate of Eligibility. Please contact our staff if you have questions or would like to apply for a VA loan in California!

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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