Ayoung Army Officer and his new fam- ily were transitioning out of the military into a civilian life in Chicago. Like so many veterans, the retiring captain first heard
about the U.S. Department of Veterans Affairs (VA)
zero-downpayment home-loan program through the
grapevine. Not knowing much about it, the family
relied on a fellow veteran employed as a mortgage
originator in Chicago for expertise.
Although the originator was well-versed in traditional mortgages, he unfortunately didn’t know the ins and
outs of VA loans. His advice, based on common misunderstandings about the VA loan program, cost the
officer thousands of dollars at closing and potentially
thousands more throughout the life of the loan.
One big pressure point of many VA home-loan experiences gone awry is a lack of knowledge regarding
county loan limits. These are maximum loan sizes —
determined by Fannie Mae — for every county in the
For most counties, the maximum, non-jumbo loan
that a borrower can get is $453, 100, although some
counties in high-cost real estate markets have expanded limits. These limits exist to protect borrowers from
over-extending on a loan, especially with the relative
uncertainty of long-term property valuations.
On conventional loans, borrowers need to put
20 percent down on a new mortgage, but with VA
loans, a borrower can purchase a home valued at, or
under, the county limit with zero down. The VA home
loan program acts as an insurance policy for lenders by
guaranteeing 25 percent of every loan. It is the originator’s job to ensure that veteran borrowers are made
aware of this before they commit to a property and
The VA will back custom jumbo mortgages for veterans looking to finance homes above a county limit,
but those borrowers need to supply a downpayment
on the amount not covered by the minimum loan
amount. So, if a veteran borrower wants to purchase
a home valued at $553, 100, that borrower will need a
$20,000 downpayment ( 20 percent of the $100,000 not
covered by the county limit).
Originators who want to focus on VA loans must fully exercise their roles as responsible fiduciaries by informing veteran borrowers of the county limit on their
loan. This is especially true if a property in one area has
an impact on the closing costs for a loan versus purchasing a home in a neighboring county.
Financial education generally is not taught in basic, officer, or any other advanced military training. Responsible originators should make sure veterans and their
families understand the VA program, and work with
them to eliminate any confusion.
Learning about a program through second- or third-hand accounts often lends credence to misconceptions and misinformation. The VA home-loan program
has suffered from years of “phone tag,” and many
myths have permeated throughout both the mortgage industry and veteran borrower communities.
Originators must understand that certain aspects of
the VA loan program are quite different from conventional mortgages. VA loans have different appraisal processes,
collateral requirements, income and credit requirements,
and underwriting guidelines. They also have different eligibility requirements that vary by type and time of service, and may even extend to surviving spouses.
Take the time to study these differences. Read the
guidelines provided by the VA and then read the
guidelines for the lenders who execute the program.
After that, seek out subject matter experts, because
there are many nuances to the program. One excellent
resource is vahome.org.
Above all else, mortgage professionals who seek to
Duty to serve
help veterans should work for a company that shares
their passion for serving veterans, understands the
significant operational differences and is financially
committed to educating their employees and customers
about the VA loan program.
Unfortunately, some professionals in the mortgage
industry have seen some aspects of the VA loan program — specifically the interest rate reduction refinance loan — as an opportunity to greatly increase
business and profits. Products have been developed
that eliminate the benefits to the veteran borrower,
and result in lost equity and additional costs that run
into the thousands of dollars.
This type of profiteering is unacceptable behavior for
any customer, let alone veteran families who have sacrificed so much and who face other service-related stress-es. The mortgage community can and must do better.
About 200,000 active-duty service members transition into civilian lives every year, and this number is
not expected to change over the next five years. These
brave men and women will face unrivaled challenges
as they transition. It is the duty of mortgage and real
estate professionals to be educated fiduciaries for all
veterans as they seek to carve out their own slice of the
Mortgage originators should strive to never be a
cause of unnecessary additional stress on any young
family, let alone veteran families. United States military
veterans have seen enough hardship. Private industry
should strive to serve them, and the best way for the
mortgage industry to do that is for originators to provide top service to them through proficient execution
of the VA loan program.
n n n
It is encouraging to see a growing number of originators take the opportunity to truly serve our nation’s
veterans through outstanding execution of the VA
loan program. Because of these service-oriented professionals, hundreds of thousands of veteran households have realized a more complete version of the
American Dream. As the industry grows, hopefully
more professionals will learn the intricacies of the VA
loan program, help dispel the myths surrounding the
program, and seize the opportunity to serve top-flight
citizens while maintaining a high level of competence
to protect their borrower’s interests. n
Todd Jones is the president of BBMC Mortgage, a full-service
lending division of Bridgeview Bank Group that offers a
complete line of residential mortgage, refinance and specialty
loans, and has helped thousands of veterans secure VA home
loans to achieve their goals of homeownership.
Reach Jones at email@example.com.
Serve Veteran Borrowers Better
Not all mortgage experts have mastered the VA loan program
By Todd Jones
Know the truth about
VA loan program myths
n Veteran loan benefits expire — False.
n A VA loan can only be used once — False.
n Only one VA loan can be used at a time — False.
n VA loans have a maximum size — False.
n Only veterans with high FICO credit scores can
get a VA loan — False.
n It is impossible to get a VA loan after a foreclosure
n VA appraisals are restrictive — False.
n VA loans are expensive — False.