VA loans help military members, veterans, and other eligible borrowers purchase homes and refinance existing loans. Some typical features of VA loans such as lower down payment requirements, reduced interest rates, and less restrictive credit minimums make these loans a great option for borrowers.
The Veterans Affairs office backs VA loans, which provides private lenders with assurance that the loan will be repaid even if the borrower defaults. To apply for a VA loan there are steps you must take to be approved. This guide will walk you through the steps and streamline the process.
Know the Requirements for a VA Loan
Before you start looking for a VA loan, you should have sufficient income and a good credit rating. Although the VA doesn't have set credit requirements, lenders will have overlays beyond the VA's guidelines that could affect your ability to be approved for this type of loan. Also, the home that you intend to purchase must become your primary residence.
Apply for Your Certificate of Eligibility
You must show you are eligible for the VA loan program to begin the process for the loan. To be eligible, you must be a veteran, active-duty servicemember, part of the National Guard or Reserve, or the unmarried spouse of a service member who was killed on duty or due to service-related injuries.
You can apply on the VA's website, send VA Form 26-1880 by mail, or work with your lender to obtain your Certificate of Eligibility. A VA-approved lender will have experience with submitting Certificates of Eligibility so it might make the process easier to go through them. Your local VA office is also a useful resource.
Shop Around to Find a Lender
Mortgage companies, banks, and credit unions who participate in the VA program will typically list themselves as qualified lenders. Getting pre-qualified is essential in home buying. It shows sellers that you are serious about purchasing a home, and more likely to follow through because you have pre-qualified for a loan. This will also help you determine the price range of homes that you qualify for. When interest rates are low, competing with other buyers for homes can make the process difficult. Some lenders offer programs that underwrite your loan upfront, taking you 75% through the loan process. This will make you a very appealing prospect to the seller.
Go House Hunting and Make an Offer
It's time to start looking around for homes that meet your criteria. Now that you’ve pre-qualified, make an offer on the home with your VA loan preapproval letter. When the seller accepts your offer, a contract will then be put in place so your lender can begin the rest of the process. The sales agreement should include a "VA Option Clause," which states that the purchase is contingent on the home meets the guidelines of the Department of Veterans Affairs.
Finish Your VA Loan Application
Now that you have agreed to purchase a home, it's time to finalize your loan application. There may be additional information and paperwork that's necessary. Your application will be submitted to underwriting. During the underwriting process, the underwriter will do a final review of your loan to ensure that you’ve met all the requirements of the VA, as well as the private lender.
Your personal and financial information will need to be validated, so it is essential to provide any required documentation. Otherwise, it could delay the closing of your new home. Once the underwriter has completed the review, they will respond to your application for a loan. You will either be cleared to proceed, given conditional approval or denied your application.