By Chris Birk
Buying a home can seem like an intimidating process. But it really doesn’t have to be.
That’s especially true for service members and veterans using the VA home loan program. From start to finish, the VA loan process has at its heart only a handful of steps.
To be sure, there are plenty of small but important details, from credit scores and sufficient income to the condition of the property. But buying a home using your hard-earned VA loan benefits doesn’t have to be an intimidating experience.
In fact, the big-time financial benefits of VA loans help scores of veterans who wouldn’t otherwise qualify for home financing achieve the dream of homeownership.
Let’s take a closer look at the five basic steps of the VA loan process.
The first step is the most basic, but it’s an important place to start. Prequalification typically takes about 10 minutes or less. A lender will ask for your permission to access your credit reports and then give you a clear sense of where you stand.
VA lenders are generally looking for a credit score of at least 620, although the benchmark can vary. That’s a considerably lower score than military borrowers will need for conventional financing.
In addition to learning about your credit profile, lenders during prequalification will look to get a better feel for your homebuying goals and objectives. They’ll ask about your income and your employment and try to identify any potential red flags at the outset.
The goal is to get you moving on to the second step — VA loan preapproval.
Compared to prequalification, loan preapproval is more involved process. Lenders will want to get a much closer look at your financial situation and your ability to handle a mortgage payment. They’ll also start developing a paper trail.
You’ll fill out documents and paperwork, and lenders will start working to verify your income and other important information. The end result should be a preapproval letter that details how much a lender is willing to loan, provided certain conditions are met.
Preapproval letters are increasingly important in today’s housing market. Real estate agents and home sellers expect to see these letters included in an offer. In fact, some listing agents won’t accept offers on a home without a copy of your preapproval letter.
To be sure, getting preapproved for a VA loan doesn’t guarantee you’ll ultimately get it. There are still a handful of things that need to happen before you ultimately get the green light.
But VA loan preapproval is a key step in the process. Like prequalification, it’s also non-binding, which means you can seek preapproval from multiple lenders.
Getting Under Contract
Once you’ve got a preapproval letter, it’s time to start the house hunt. Finding a real estate agent who truly understands the VA loan program can make a tremendous difference for military borrowers.
VA loans are specialized loans that require specialized knowledge. The VA has its own Minimum Property Requirements that homes must meet. Real estate agents who know the program can help ensure veterans are focusing on move-in ready homes that are a good fit for this long-cherished home loan benefit.
Once you find a home you like, you’ll work with your agent to craft a purchase offer. In addition to no down payment and no mortgage insurance, VA loans also limit what borrowers can pay in closing costs. It’s common for VA borrowers to ask a seller to pay most, if not all, of their closing costs as part of the negotiation process.
The result of negotiations with a seller should result in a contract that makes sense for both parties.
Appraisal & Underwriting
As soon as you’re under contract to purchase a home, your lender will order the VA appraisal on the property. The appraisal has two main components — determining the fair market value for the home and making sure it meets the VA’s property requirements.
VA appraisals are typically completed and back to the lender in under 10 days. Your lending team will be working in the background to pull together additional documents and paperwork before getting your loan file in front of an underwriter.
The underwriter will review the loan file and alert the loan officer if there are any shortcomings or additional information needed. It’s important for borrowers to fulfill these requests as quickly as possible.
If things go well, the underwriter will review everything and issue a “clear to close,” which means you’re ready to head to closing day.
Closing day brings paperwork, a lot of signatures and finally celebration!