The VA Loan Process
You can apply for a loan from the U.S. Department of Veteran's Affairs (VA) to finance 100% of your primary home purchase. There is no mortgage insurance required and no prepayment penalty. This program does not apply to rental or vacant homes.
Although the process of getting a VA mortgage is the same as the traditional mortgage process, there are some differences. Here are the steps to follow:
Part 1: Determine Your Eligibility For A VA Loan
The Veteran's Affairs department backs VA loans, and local leaders across the country make them. However, the first step is to prove you meet the VA's servicemember requirement.
This document is called the Certificate of Eligibility. Depending on the type of service you have, such as veteran, active duty, or former National Guard member, you will need a COE.
You can request your COE via the VA benefits portal or have it sent to you by your lender. For more information, please refer to the instructions on how to obtain your COE.
Part 2: Search For VA Lenders
All VA-approved lenders must include a COE in the loan underwriting process. A VA lender can often get it for you in minutes via a lender-only portal.
It is easy to find VA loan lenders. You can easily screen VA lenders by reviewing the rates and reviews of lenders that appear in your search results.
You can then contact the VA lenders most favorable to your case to arrange a further interview.
Part 3: Select VA Lender(s) And Get Pre-Approved
People often start looking for homes before getting pre-approved by lenders. Unfortunately, this can cause problems if they are unable to get the loan you need.
The next step is to apply online for a VA loan from one or more VA lenders with which you are most comfortable and then get pre-approved.
The lender must send you a formal written rate and fee quote within three days of your application. Get familiar with VA closing costs here.
Once you have obtained your COE or reviewed the one you already have, the lenders will require you to submit detailed documentation about your residence, income, assets, and debt.
It is crucial to promptly provide any documentation requested by your lender. All lenders must adhere to the same VA loan approval guidelines. If one lender asks for less upfront, they might need it later.
You, Will, Need To At Least Provide:
You can obtain your full credit history and scores from all three major credit bureaus (Equifax Transunion, Experian) when you authorize a lender to run it.
Two years of residence history including rental and ownership costs
Two years of employment history. (See notes below, if you are on active duty.
Two years of tax returns filed
All jobs require two years of W2s
Statements for all bank, investment and retirement accounts, most recent 2 months
VA estimates that your monthly housing costs plus any other monthly payments (car loans or student loans) cannot exceed 41 percent of your income. Your income cannot exceed 41%. You can discuss this with your lender if you have any questions.
To prove income and ongoing service, you will need a Leave & Earnings Statement (LES), if you are on active duty.
You must document your income if your separation date falls less than 12 months from the closing of your loan.
Documentation proving re-enlistment, extension, or new ETS date beyond 12 months after loan closing.
A statement that you are reenlisting, along with a statement from the Commanding Officer confirming that you are eligible and that they believe you will be allowed to reenlist.
After being released from active duty, you will receive a letter from your private employer. Include start date, pay rate, and whether the employment is part-time or full-time.
Part 4: Choose A Real Estate Agent
After your VA lender has received your COE and all documentation, your loan will be approved by the lender's Underwriter.
You know your eligibility so you can choose price ranges to search for a specialist at your price point.
While your agent does not need to be a specialist in veterans loans or VA loans, it is important to introduce your lender to your agent.
Your lender will then be able to verify with your agent the amount of home you are approved for VA financing.
Part 5: Look For Homes And Write Offers
Your agent will show you properties until they present something that you are interested in. Then, use the VA loan calculator to find out how much a monthly mortgage would cost for a specific home.
An offer is a contract of purchase that your agent presents to the seller's agent.
The seller will need to know what price you are willing to pay, which inspections or repairs you would like when you will complete your inspections, and how quickly you can close the deal.
To show the seller you have been approved, a pre-approval letter should accompany your purchase contract.
Pre-approval is a guarantee that you, as a borrower, are approved. However, a loan is made to a borrower or to property. Therefore, the pre-approval letter will often indicate that the loan won't be completed until the lender has reviewed the title report, purchase contract, appraisal, and any other inspections.
This is why your agent and lender need to collaborate in writing purchase contracts.
You are legally bound to the property if the seller accepts your offer.
Part 6: Lender Completes Appraisal And Other Property Underwritings
The VA appraisal will be ordered by your lender for the property that you are under contract to purchase. The VA appraiser is not an employee of your lender, even though he orders it. Instead, he is independently licensed and VA-approved.
This guarantees that the appraisal is objective and fair.
To determine the value of your home, you will need to use the VA appraisal.
A VA appraisal can also be used to evaluate the property's condition, with a focus on the following:
Functional roof, heat, and plumbing.
Termites and other pests are not an issue.
No lead-based paint.
There is no water intrusion.
There are no safety or health concerns.
Before the loan can be closed, any of these items must be repaired. The buyer and seller should negotiate who will pay for the repairs.
The lender must approve the appraisal:
The purchase contract includes any additional terms, such as seller credit or agent credit to the buyer.
To ensure that there are no liens on the property, you must obtain a title report.
Part 7: Closing
After all, these items have been cleared and your borrower profile hasn't changed since pre-approval, you can close your loan.
For you to sign, the lender will send documents to an attorney or escrow company.
Depending on the state you live in, the lender may send your loan funds along with your documents or after they have received your documents.
After the loan funds are received, the property can be officially transferred from the seller to the buyer.
