Common misunderstandings shared about VA loans can cause potential customers to be turned down incorrectly
Veterans Affairs (VA) loans have been among the most misunderstood and sometimes maligned lending products in the mortgage space. One organization, as part of its ongoing outreach efforts, presented research Wednesday hoping to dispel common myths about the loans.
Vetted VA, an organization that works to educate about VA home loan benefits, presented a white paper on Wednesday at Equity Prime Mortgage’s The American Gift (TAG) event in Atlanta, Georgia.
The organization partnered with Polygon Research to sort through 2024 Home Mortgage Disclosure Act (HMDA) modified loan application register (LAR) data to debunk seven common myths about the loan. More than 124 million loan-level transactions were analyzed for the report.
Gay Veale (pictured top), loan officer with Epoch Lending and chief experience officer with Vetted VA, presented the report. She mentioned how intimidating lending was when she first started.
“I felt very overwhelmed with trying to learn all the things about conventional and about FHA and USDA and DSCR,” Veale said. “I was like, ‘This is just too much. How do people do this?’ And it just occurred to me, ‘That's not your place. Your place is VA loans.’ And so I set out to try to figure out how to be a really good VA loan officer.”
The first myth the report tackled was the belief that VA loans are denied at a higher rate and, therefore, are higher-risk loans. The data showed an 8.4% denial rate for VA borrowers compared to 15.6% for conventional borrowers. It also had a lower denial rate than FHA and USDA loans.
“They have lower denial rates of any loan type by far,” she said. “It’s not even close.”
The second misconception is that VA loans are expensive for Veterans. The data showed the average interest rate for VA loans was 6.124%, compared to 6.768% for conventional. Again, VA loans beat out FHA and USDA loans.
VA loans can go up to 100% loan-to-value (LTV) without private mortgage insurance (PMI). A side-by-side comparison of a nearly $461,000 VA loan and a conventional loan shows the conventional loan's cash to close being nearly $60,000 higher.
Veale was frustrated that she was hearing a lot of these misconceptions not only from loan officers, but from Veterans.
“How many of you guys have heard some of these?” she asked. “Like, heard agents or even another veteran? That's the worst part when I hear another veteran tell me these things that they've heard about the VA loan.”
VA loans allow for significant wealth
The survey also compared Veterans who used VA or non-FHA government loans to own a home versus those who decided to continue renting instead. In total, 3.85 million people in the sample owned a home, while 3.55 million rented. The average net worth of those who owned a home was 18 times higher.
Another positive is the benefit minorities saw in the report, thanks to their military service. For Veterans, Active-duty, Training for Reserves or National Guard minorities, 67% ended up owning a home, compared to 33% renting. For minorities with no military service, the breakdown was nearly even, with 49.9% owning a home and 50.1% renting.
Finally, an often-repeated myth about VA loans is that they can only be used once. The loan can be used more than once, with the funding fee increasing for subsequent uses only if putting less than 5% down on the loan.
The VA guarantees the loan once it is closed. The lender is protected if the borrower cannot repay or a later owner defaults. VA loans are assumable under certain conditions, unlike many other types of mortgage loans.
Only one-third of Veterans have used a VA loan
There is still work to be done by Vetted VA and other advocacy groups to educate Veterans of the benefits that they earned with their military service.
“There's approximately 18 million Veterans in the United States, and only a third of them have ever used their VA loan,” Veale said. “And it's less than that who currently use it. So maybe they've used it before and have gone back to renting.”
Christina McCollum of Churchill Mortgage urges first-time buyers to invest in homeownership despite high rates, emphasizing the long-term wealth benefits over renting.https://t.co/JjfNcjbP5E
— Mortgage Professional America Magazine (@MPAMagazineUS) May 7, 2025
The VA loan program has undergone reforms since its inception in 1944. Veale believes that some loan professionals remember bad experiences with the program from years ago that they continue to harbor today.
“That’s why we have a lot of these myths,” she said. “Because the VA loan has changed a lot. Some realtor from 1972 who had a bad experience holds on to that forever and has decided that VA loans are the worst thing to ever exist in home buying. They allow that to permeate throughout their brokerage and their communities.”
She hopes that brokers will give the VA loan program a second look and use it as a tool to help Veterans get mortgage loans closed.
“If you’re not familiar with something, what’s the natural thing to do?” Veale said. “Did you push it away? You say, “I don’t know,” and you just use conventional because you don’t know what you’re doing. It’s natural. But we want to stop that. We want to turn you all into VA loan Jedi as well.”
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