Steps to Getting a VA Loan

If you have made up your mind and, indeed, you want a VA Loan but wants to know exactly how, here are six easy steps that you can follow:

1.  Determining Eligibility

VA guaranteed home loans benefit veterans because they do not need to make a down payment and there is no upper limit or required cap on the income of the borrower.  Without a down payment as security against foreclosure, lenders receive a certificate of guaranty from VA.  In essence, as gratitude for honorable military service, the government is vouching for the veteran’s trustworthiness to repay his/her debt.

Now, to determine eligibility, a military veteran, active duty person, or a member of the national guards or selected reserves, must submit a 2-page VA Form 26-1880 along with proof of service (DD Form 214)—a statement of active duty, or proof of participation in the national guards or reserves—to the VA Eligibility Center, P.O. Box 20729, Winston-Salem, NC 27120. Based on the applicant’s length and type of service, VA issues a certificate for each person determined eligible to apply for a VA guaranteed home loan. The status of the application can be checked after ten days by calling 1 (888) 244-6711 between 8:00am and 4:00pm Eastern time.

2. Viewing and Inspecting the Home

Real estate agents are usually hired by home buyers for several reasons. They know how to determine an affordable price range, suggest certain home features suitable for the buyer, schedule home tours, negotiate sales contacts and hold earnest money deposits. These real estate agents however should be licensed by the state. A state-licensed real estate professional can explain the legal requirements for buyers and sellers, and can refer buyers to local lenders and certified home inspectors. Buyers should personally accompany their preferred home inspector during the inspection of the property. This is for the buyers to have someone to answer them should they have any questions about the home systems.

3. Requesting the Loan

Home buyers may want to contact a lender even before they sign a contract for a home, so that they can be pre-approved to determine their maximum mortgage amount. Those who wish to obtain a VA-guaranteed loan should make sure that the sales contract includes a financing contingency, making the contract subject to approval for a VA guaranteed loan. After the lenders verify and review past and present job and credit history of home applicants, they will compare it with VA loan approval guidelines. After which, one of two scenarios may happen. One, it may be approved right away. Second, if the documents with the loan request cannot be approved, then additional written information must be presented to the lender or the VA for further consideration.

VA Lender Appraisal Processing Program (LAPP) lenders can process loans faster than other lenders. VA LAPP lenders do not need to send any paperwork to VA until after the home sale is closed. VA’s long-standing policy is not to recommend any specific lender.

VA recommends that buyers compare lending terms among several lenders themselves in order to find the best combination of interest rates, discount points, and other negotiable costs for a VA guaranteed loan. This way they get to choose the best for themselves.

4. Appraising the Property

When a veteran who is deemed eligible contacts a lender to request a VA guaranteed loan, the lender then obtains a VA number for the request via the Internet.  The lender uses the VA number to monitor progress of the appraisal and loan application. The lender also sends a VA form to a state-licensed real estate appraiser who will visit the home to give the lender and VA an appraisal of the actual market value of the property. The appraisal tells the lender and VA whether the property is expected to be adequate collateral for the requested loan. Should the home have constructional defects, neither the appraisal of the home nor the VA guaranty is a warranty of these and their resulting repair costs. Builders and brokers can issue warranties for the condition of the home’s structure and systems.

5. Closing the Sale

If the loan and home are approved, the buyer needs to contact a state-licensed insurance agent who will provide homeowner coverage to protect both the owner and lender from property damage and loss. Title to the home is usually examined and insured by a title insurance company that may also prepare closing documents and enter them into public records after the closing. After the home is purchased and the loan is originated, the lender usually sells the active loan to another company which will receive the loan payments and pay the real estate taxes and insurance premiums.

6. Prequalifying Worksheet

The Prequalifying Worksheet is in Excel format. It gives you a general idea of what you can afford, and whether you are within VA underwriting guidelines for approval. This Prequalifying Worksheet is not a commitment to lend, nor can it be used to determine whether a lender will approve the VA loan.