Common VA Loan Mistakes Veterans Make (and How to Avoid Them)
The most common — and most costly — mistakes veterans make when using the VA home loan benefit, with concrete tips for avoiding each one.
The most common VA loan mistakes are: picking a lender unfamiliar with VA loans, paying the funding fee when exempt, skipping the COE step, accepting a low appraisal without challenging it, and using the loan for non-primary residences.
The VA loan is a great benefit. It's also full of small traps for first-time and repeat users alike. The good news: every common mistake is preventable with a checklist.
1. Picking the Wrong Lender
VA loans are not the same as conventional loans. Lenders who close only a handful of VA loans per year miss exemptions, mis-handle MPR issues, and underprice their service. Use a high-volume VA lender.
2. Overpaying the Funding Fee
If you are rated 10% or higher service-connected, you are exempt. If a pending claim later approves with a retroactive effective date, you may qualify for a refund. Always check both before and after closing.
3. Skipping the COE Step
Without a Certificate of Eligibility, you cannot close. Lenders can usually pull it electronically in minutes — do this before house hunting, not after.
4. Accepting a Low Appraisal Without Challenging It
If the VA appraisal comes in below contract, you have options: request a Reconsideration of Value (ROV) with comparable sales data, renegotiate price with the seller, or pay the difference in cash. Many veterans concede too quickly.
5. Trying to Use the Loan for a Rental
VA loans require occupancy as a primary residence within 60 days. You can buy a 2–4 unit property and rent the other units, but you must live in one.
6. Not Restoring Entitlement
After selling a VA-financed home and paying off the loan, you must request entitlement restoration to use full benefits again. Many veterans assume it's automatic.
7. Ignoring Residual Income
The VA's residual income test ensures borrowers have enough cash flow after debts. Lenders sometimes approve loans where DTI is fine but residual income is borderline — leading to financial stress within a year.
8. Working With an Agent Who Discourages VA
Some agents push veterans toward conventional loans 'to make offers stronger.' Find an agent who knows VA loans and writes offers accordingly.
Common mistakes to avoid
- Picking a low-volume VA lender
- Overpaying or failing to recover the funding fee
- Skipping COE
- Accepting a low appraisal without challenging it
- Using a VA loan for non-primary residence
- Failing to restore entitlement after a prior VA loan
- Ignoring residual income
- Working with an agent who discourages VA financing
Frequently asked questions
Conclusion
Most VA loan mistakes are preventable with the right lender, agent, and a short checklist. Use this article as a pre-closing review, and don't be afraid to push back on professionals who try to steer you away from the benefit you earned.