VA Loans are an incredible benefit available only to veterans and active members of the military. These exclusive loans are a preferred way for many to achieve their dream of owning a home. With no required down payment, no private mortgage insurance, and less stringent requirements than conventional loans, VA Loans are a very popular option for qualified homebuyers.
For those who want to get a VA home loan VA loan pre-approval is a must. This one step can indicate to a realtor and a lender that you’re serious in your search for real estate and that they won’t be wasting their time on a buyer who may not be qualified. You’ll also know the maximum mortgage for which you qualify, so you can look for properties that fall within your price range. Click here for an overview and a brief video on the VA home buying process.
How Does A VA Loan Work?
It’s important to note that although they previously didn’t provide financing, the VA now provides direct home loans as well as VA-backed home loans. Under the direct home loan program, the mortgage is provided directly by the VA. Under the VA-backed mortgage program, the VA guarantees the loans up to a specified dollar amount as long as the borrower is qualified and the asking price is within the range specified by the VA.
Lenders may be more inclined to process a loan that’s backed by the VA because it minimizes their risk. However, they may require a higher credit score or a current appraisal of the home. There may be other stipulations required by financial institutions, but each lender is unique. For example, at 1st United Mortgage we help with credit scores as low as 560.
Do All Lenders Provide VA Loans?
Not all lenders provide VA loans or any other type of government-backed loans, particularly in smaller towns. Government loans can require additional paperwork for lenders, but the VA has streamlined the procedure for obtaining a VA loan, so VA home loan pre-approval is much simpler than it once was.
Who Qualifies For A VA Mortgage?
Generally, veterans who have served on active duty for at least 90 days and have been honorably discharged are eligible for a VA home loan. Other stipulations apply for those who have served during wartime and those who have served more recently. A complete list of service dates can be found here on the Veterans Administration website.
In addition, surviving spouses who have not remarried may be eligible if the veteran died in service or from a service-connected disability. Spouses of a service member who’s missing in action or a prisoner of war may qualify, and a surviving spouse who receives DIC, or Dependency and Indemnity Compensation, may be eligible. Those who remarry after age 57 have special caveats that can be found on the above link.
Other government employees such as Public Health Service officers, midshipmen or cadets, merchant seamen from World War II, and others may also qualify for a VA home mortgage.
If you’ve previously used your VA home loan entitlement, it can be restored if:
- The property has been sold and the loan paid in full.
- A qualified veteran agrees to assume the loan and substitute their entitlement for yours.
- You’ve paid the loan in full but still retain the property.
What’s The Procedure For Getting A VA Home Loan Pre-approval?
The pre-approval process for a VA home loan is similar to that for a conventional loan except you’ll need to provide proof of your military service and your COE, or certificate of eligibility. If you’ve lost your DD-214, you can request a copy of it here.
Documents You’ll Need For VA Home Loan VA Loan Pre-approval
The VA requires that you have sufficient income to make your monthly mortgage payment, but they’re less concerned with your credit score than a financial institution may be. You’ll need your:
- Pay stubs for the preceding month
- Most recent two years of tax returns
- Government issued ID
Active duty service members, including National Guard or Reserve members who have never been on active duty, will also need a current statement of service that’s signed by the personnel office, the adjutant or the unit commander or higher.
Unmarried surviving spouses who receive compensation benefits will also need VA Form 26-1817 or VA Form 21P-534 for those who aren’t receiving benefits.
What Additional Costs Are Incurred When Using A VA Loan?
Closing costs vary by lender, but the VA allows specific charges to be assessed on a VA loan. They are:
- Origination charge: This can be up to 1 percent of the loan amount. The nomenclature isn’t important as long as the aggregate doesn’t total more than 1 percent.
- Appraisal fee: Appraisals average around $525 but will vary depending on the location of the home. This cost is paid up front by the buyer, so price comparisons may benefit you. For a chart of the VA’s appraisal fees, click here.
- Title Insurance: Title insurance protects both the buyer and the lender from hidden or undisclosed liens that may be associated with the property.
- Points: Discount points are paid to the lender at closing in order to lower the interest rate. Normally, this doesn’t happen with VA loans, but it’s possible.
- Credit Report: VA recommends that a credit report shouldn’t exceed 50 dollars, but it’s at the lender’s discretion and is an up-front fee paid by the buyer.
- Septic, Termite, and Well Inspections: In most states, the VA requires the seller to pay for a termite inspection. However, buyers may be required to pay for well or septic inspections.
How Long Will It Take For My Loan To Close?
Usually a VA loan should close within 30 days. However, several factors can influence that, such as:
- Your lender’s processing time
- The time it takes for the appraisal
- How quickly you return the required documentation
VA loans frequently close in less than 30 days, despite some allegations to the contrary, and the process has recently been streamlined so that VA loans are expedited. Many times, paperwork can be completed and submitted online, which can greatly reduce the processing time. If you have your pre-qualification completed so that you know exactly how much house you can afford and you have all your documentation ready in a timely manner, your lender may be more likely to expedite your loan processing. Pleasant and prepared borrowers are always easier for a lender to cope with, so make sure you’re cooperative.
Is A VA Loan A Good Idea?
VA loans are ideal for those who can obtain them. Some of the advantages include:
- No down payment
- Lower closing costs
- Government backing
- They’re reusable
- No prepayment penalties
- Lower interest rates
VA mortgages are a great benefit for the veteran, so if you qualify for one, be sure to consider obtaining one for your next home. Contact us today to speak with a VA Home Loan Specialist.