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VA Loan Application Process


A VA loan is a loan like any other made through a bank, savings and loan, or credit bureau. However, unlike an average loan, a VA loan is only available to veterans and the loan is guaranteed by the VA for 25% (up to $417,000) of the total loan amount in most places. In some counties that are very expensive, this amount has been raised to more than $1,000,000. VA loans also allow a veteran to secure a loan without a down payment and receive very competitive interest rates. If you already own a home, you can also refinance your home using a VA home loan to either reduce your payments or take money out of the equity that is in your home to repair it.

The paperwork around buying any home with a loan is horrendous. Adding the military requirements on top of it makes the process almost unbearable. But like anything else, preparation and planning will get you through it. Get a portable file folder marked “Home” and begin using it. The more you fill it up, the closer you are to being finished with this process. Your military basic training probably took 4-5 months; count on about the same amount of time from the beginning to the end of the buying a home/loan process. If someone tells you they can do it “overnight” or that it will be “a piece of cake,” smile and carry on knowing that this probably isn’t the case. Expect the best but prepare for the worst.

The first step to applying for a VA loan is to fill out and submit Form 26-1880 to get your Certificate of Eligibility for a VA loan. While you are waiting for that piece of paper to come back, get a copy of your own credit history and credit report from one of the three main credit reporting agencies: These are Equifax, Experian and TransUnion. Review this information carefully. If there are any errors you will need to contact the credit-reporting agency and have these fixed. Should any past problems appear on the report — for example, a billing dispute that was never settled — you will need to collect all the documents related to that and write an explanation explaining what happened and why. If you have time (like a year or two) it's also not a bad time to pay off as many of your bills as you can to improve your credit score. This will help you to get a better rate on your loan and can up to a lot of money saved over the long run.

The next step in the loan process is to find a VA approved lender. Shop around to find one that has great rates. Look carefully at closing costs and any extra fees. Find a contact person you like and that will go out of their way for you. Loan agents are usually paid on a sliding commission scale and they work for you. A good loan officer or mortgage broker can make all the difference. Often they will know a good realtor and can connect you with them. The same equation works in reverse — a good real estate agent can put you in contact with a good lender. Having qualified professionals on your side is an asset when buying a home.

The next step, pre-approval, comes naturally upon finding a lender. The lender will look at all your assets, debts and income and combine this with your credit history and your VA eligibility to determine how much money they can lend you. This pre-qualifying step is important because if you find a great house and it is a real bargain, you will likely have to compete with other buyers to get it under contract. Your pre-qualifying letter with VA eligibility will tell the seller you can afford the home, and they will likely prefer you to another buyer. Next you will select a home and draw up a purchase agreement. This is usually done with your realtor. You can draw up a purchase agreement on your own but it can be difficult.

The VA Appraisal is the next step. The lender usually requests this appraisal and your loan officer should be familiar with the process. The VA appraisal is the value the bank puts on the home and must come in as being equal to or more than the amount that you are willing to pay for the property. If it doesn’t, you may not get the loan. Securing the loan is usually a contingency clause in your purchase agreement that protects your good faith money should this happen. If you don’t have this contingency in your purchase agreement, you may have to forfeit any deposit you have made to the seller even if you cannot buy the house due to no fault of your own.

Provided the home you are interested in passes the VA appraisal and you have satisfied the other necessary things for purchase, the lender will finalize the loan and produce a series of documents for you (and your spouse) to sign. Generally you will meet with the loan agent or attorney, sit down and sign the papers and they will explain them to you. Then you just wait for the loan to be funded and reported to the VA. Once it is funded, you become the proud owner of a new home. Be aware that the closing costs for home loans can vary from state to state and you should budget for this when making plans to purchase a home. You will also want to calculate into buying costs things like inspection reports, moving costs and perhaps the cost of getting some new furniture or adding updates to the house. It’s always better to assume the entire closing is going to be more expensive than you think it will be.

Buying a house and getting a loan is a difficult process, but luckily with a VA loan guarantee on your side, you are much more likely to get a good loan and a great house than most of the buyers on the market today.

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