Getting a VA Loan isn’t significantly different from getting any other type of mortgage. For homebuyers, the VA loan has five basic steps: pre approval, house hunting, getting under contract, underwriting and closing. This process typically results in a stronger financial future, using arguably the most powerful mortgage product on the market.
Here we detail the step-by-step process of getting a VA loan and how Veterans can get the most out of their VA loan benefit.
Step 1: Preapproval for a VA loan
Obtaining VA loan preapproval is a crucial first step. Pre Approval offers you a good idea of your purchasing power and is the first approval from your mortgage provider. Any offer you make on a house gains strength if you have pre approval. Home sellers in the real estate market of today anticipate receiving offers from pre approved purchasers. Without a copy of your pre approval letter, some sellers might not even consider your offer.
Your lender will review your credit, finances, job situation, service history, and other factors during pre approval. Your service history is verified by lenders using the Certificate of Eligibility (COE). As lenders can often get this document on your behalf with just your date of birth and social security number, you don’t need a COE to begin the process. W-2s, most recent pay stubs, and bank statements are usually additional documentation. Depending on the documentation needs of your lender, this VA loan procedure phase could take minutes or hours. The types of documents you may be asked for can vary depending on your salary, military experience, and other factors.
The following documents may be required for preapproval of a VA loan:
- A copy of your license or other form of official identity
- A copy of your Reserve/Guard points statements or DD-214
- A declaration of service for debtors who are active duty
- W-2s and recent pay stubs from the previous two years
- Last few bank statements
- Letters of disability awards
If you have any concerns regarding the required papers, speak to your loan officer at Dream Home Mortgage. The quicker you return this document, the faster the lender can check the data and complete your loan pre approval. A preapproval letter often comes with a number of requirements to proceed to the final stage of the VA loan procedure, so keep in mind that it doesn’t guarantee financing.
Step 2: Finding a home
You’re prepared to begin the VA home buying process’ most exciting phase, the house hunt, now that you have your pre approval letter in hand. It’s crucial to find a real estate agent who is knowledgeable about VA loans. Some properties may be a better option for VA loans than others because these are more specialized home loan choices. Also, closing expenses are a huge benefit of VA loans, and veteran-friendly agents can assist purchasers in maximizing their benefits.
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At Dream Home Mortgage, we have a nationwide network of brokers that are specialized in VA loans. VA loans, like the other government-backed mortgage choices, are only for people who want to buy primary residences to live in full-time. Veterans are eligible to purchase up to a four-plex if they intend to dwell in one of the units. Houses should generally be in decent condition. The Minimum Property Standards are a set of general property condition standards that are considered as part of the VA appraisal process (MPRs). MPRs are not as thorough as a house inspection and only provide a high-level summary. Although a home inspection is not required by the VA, it is usually always a wise investment.
If the appraiser discovers MPR problems, they might need to be resolved before the loan is closed. VA buyers have the option of asking sellers to cover repairs or, in extreme cases, paying for them themselves. With a VA loan, buying a fixer-upper is feasible, but the VA appraisal process may be hampered. If you’re looking for that kind of home, have a more in-depth conversation with a lending expert. Making an offer to purchase a property is the next action after finding one you adore.
Step 3: Signing a contract
You can create a compelling offer with the aid of your loan officer and a reliable real estate agent. Your starting point for a purchase price will be influenced by your agent’s analysis of recent comparable local house sales. Price and negotiating tactics might change based on the real estate market, the specific home, and many other factors. When making an offer, veterans should discuss closing fees with their loan officer and agent. Closing fees for VA loans can vary depending on a number of variables. Buyers can request up to 4% in concessions from sellers, which can be used to pay for escrow charges, among other things, and all of their loan-related closing costs.
The majority of potential VA buyers will provide a contract with a number of conditions that cover particular occurrences prior to the loan closing. Common contingencies include the right to a home inspection, how to handle repair requests, how long the buyer has to find financing, the amount of earnest money that must be paid up front, and more. For the Veteran’s earnest money in relation to the VA assessment, every VA contract includes additional protection. If the property’s appraised value is low and the Veteran decides to back out of the agreement, a specific addendum guarantees that VA buyers will receive their earnest money back.
VA purchasers may need to engage in a few rounds of negotiation before a purchase agreement is finalized. Furthermore, remember that some markets are more challenging than others. Before you locate a deal that works, you can make offers on a number of houses. Each buyer-seller scenario is unique.
Step 4: Underwriting and Appraisal
If you’re in a contract, the VA loan application procedure accelerates. To ensure that the loan and the home are legitimate for the borrower, lender, and VA, your loan team sends your contract and supporting papers to loan processors and underwriters. The lender will also request the VA appraisal at this time. The cost of the appraisal is normally paid for up front by the homebuyer, though it is possible to request repayment from the seller before closing. The VA appoints a neutral appraiser to evaluate the property’s worth and state. Lenders are not in charge of the appraiser, the timetable for the appraisal, or the appraisal’s evaluation of the property.
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The appraiser will use current comparable home sales when determining the fair market value of the property. The home must appraise for at least what the buyer has pledged to pay. The buyer and seller will have to renegotiate the purchase price or cancel the deal if the evaluation is inadequate. Buyers can ask the seller to cover repairs if the appraiser deems them as necessary to meet the VA’s Basic Property Standards, or they may even choose to shoulder the costs themselves in some circumstances.
Throughout the course of the appraisal process, your loan team is likely to have inquiries and requests for further information. This stage typically proceeds more smoothly the sooner you respond to your lender with your replies and relevant details. If you have any concerns or require extra information regarding an underwriting request, speak with your lending team. You’ll receive a “clear to close” after the appraisal and underwriting, which signifies you’re prepared to go to your closing day. Even though you’re “clean to close,” getting financing is still not guaranteed.
Step 5: Closing Your VA Loan
A Closing Disclosure will be provided to VA buyers just before their scheduled loan closing. Buyers can contrast their actual closing expenses and loan details with the estimates they received earlier in the process using this document. This document is normally reviewed with you by your loan officer. If you have any issues regarding your charges, fees, or anything else, make sure to inquire. You might also take a final tour of the house. You can check for repairs during the final walkthrough, ask to have anything you didn’t want to stay behind removed, and more. If there are any issues, get in touch with your lender and real estate agent as soon as feasible.
Expect to sign a tonne of papers on closing day and to finally receive the keys to your new house. Gaining a thorough understanding of the VA loan procedure will enable you to make the most of your financial situation and this highly potent benefit. Speak to a Dream Home Mortgage loan expert to get your home-buying process started.