Are you a veteran who is ready to buy a home? If so, then it's time to investigate the steps toward taking out a VA (Veterans Administration) home loan?
Prequalifying / Pre-approval
VA loans are a benefit that veterans earn for their military service. They are available to veterans in good standing or a veterans surviving spouse.
To begin the process, you need to request a Certificate of Eligibility. Your lender may also be able to help you obtain one. The Certificate verifies that you meet the service requirements to qualify for a VA loan.
Next, talk with a lender to get prequalified. Once you're prequalified, you'll have an idea of how much you can afford to spend on a home so that you can begin your home hunt.
The lender will review your financial situation, including your debt, employment history, credit score, and more. To qualify for a VA loans, you must have a minimum credit score of 580.
VA loans do not require a down payment or Private Mortgage Insurance (PMI). There are loan limits similar to conventional loan limits. Currently the maximum loan amount with no down payment is $484,350.
The Loan Process
Once you are prequalified, you can start shopping for your new home. This is often easier with a realtor because they have access to more homes than those appearing on the internet.
Realtors help you put in an offer and ultimately get a contract on your dream home. Once you have a contract, you’ll begin inspections, appraisal, etc. Be sure to provide your lender with any income and asset documents in a timely manner so that your closing goes quickly and smoothly.
The VA loan process is similar to the other types of loans, but you must use a VA-approved appraiser. Your lender will help you schedule the appraisal. VA appraisers estimate the home's value, and they also ensure that veterans are getting a quality home that is safe, sanitary, and structurally sound. Buying a home that requires few repairs will help the appraisal go more quickly.
Your lender and realtor should help you through every step of the process to make it as smooth as possible.
Your lender can lock in your rate and loan terms, often for up to 90 days. For conventional loans, lenders can often only lock in rates for 30 - 60 days. Like all loans, VA rates and loan terms vary depending on the credit worthiness of the buyer, the size of the loan amount, and other factors. All things being equal, interest rates for VA home loans are typically lower than most other programs.
Closing on a VA loan is slightly different than other loans.
- There is no down payment required for a VA loan if you stay under the loan limit for your area. Of course, you can always make a down payment if you would like to lower your overall loan amount or monthly mortgage payments.
- The VA adds a funding fee to the loan amount, but you don’t have to pay it out of pocket. The size of the funding fee varies based on each veteran's situation. Most first-time VA borrowers will pay 2.15% of the purchase price. Disabled veterans are usually awarded a fee exemption and do not pay a funding fee. The size of your funding fees is indicated on the Certificate of Eligibility.
- You may need a DD-214 if you have been discharged from military service. This is not always needed, but it is a good idea to find your DD-214 and share a copy with your lender just in case. If you do not have a copy, you can apply for one through the VA benefits portal.
Don’t prejudge your credit, time in service, or job history. Often, veterans prejudge themselves and decide that they won't qualify. Many don't even attempt to apply for a home loan.
Let your lender look at your finances to see if you qualify. If you don’t qualify right now, your lender should be able to explain why. Then, you can work on getting yourself in a better position to qualify in the future.
Some lenders don’t follow the 580 credit score rule and instead impose higher standards. Some lenders may require a credit score of 680 or higher even though VA allows 580. That lender may turn you down when you could get a loan through another lender that honors the minimum VA requirements.
Meeting with your mortgage lender well in advance can help you plan for a smooth home buying process. While the lender can’t give specific financial advice and every situation is unique, a great lender can serve as your “coach” to help you prepare. They will walk you through each step, help you determine the best loan options, and ensure that you are comfortable with the responsibilities of home ownership.
Lincoln Lending (NMLS 398026) has an experienced team who can talk with you about your plans and coach you through the home loan process. We are glad to offer a no-cost, no-obligation information session to review your specific situation and the options available. To schedule a session, please call (405) 799-5363 or email us at Info@LincolnOK.com.