Applying for VA loans can be the difference between having to rent a home for far longer and being able to own much earlier. If you have been in the military or are currently active, using the Department of Veterans Affairs to aide you in acquiring a loan can be very useful in achieving home ownership. However, there is a process to go through for VA loans.
What a VA Loan Offers
As active duty military or a veteran, you qualify for several things through the VA. You are able to finance a home in an area where there is a shortage of credit, such as in a more rural area, for up to 103.3 percent of the home’s value or its sale price, based on the lower of the two figures. You will not need private mortgage insurance for this. You may qualify for a 20 percent second mortgage. You also have access to up to $6,000 to improve the overall energy efficiency of the home you purchase. The benefits are great, if you are willing to go through the process.
Get Your Fundamentals in Order
You need to have a real estate agent to help with the purchase process. Then you need to begin shopping around for a lender that offers VA loans. Since each lender has their own rules for pre-qualification, interest rate, closing points and discount points, seek out as many potential lenders as you can to get the best possible deal. In some cases, one lender may offer you a larger potential loan than another lender does because of differing requirements between them.
The general rule is that to be eligible, you must be active duty for at least 90 consecutive days, or have a total of 6 years as a reservist, or have 24 months of active duty as a retiree or before being honorably discharged, or have been discharged due to reduction-in-force or due to a service-connected disability. Even if you have used VA loans before, you may be able to restore this entitlement through transfer or through paying off your loan in full. Once you have satisfied your requirements, you can receive your COE or Certificate of Eligibility to verify to the lender that you meet the necessary requirements.
Find Your Home and Sign Your Agreement
With your real estate professional’s help, find the home you want and put together your letter of intent. Once the seller accepts it and the terms you develop during the negotiation, present your contract. It needs to have a VA Option Clause, which will establish that the Department of Veterans Affairs can de facto cancel the contract by deciding that the property’s value is inconsistent with the loan due to being improperly valued or too expensive. With this Clause, you can cancel the contract without forfeiting earnest money and without other penalties.
Apply for Your Loan and Allow Time for Processing
A VA loan is like any other kind of loan in that you need check stubs, bank statements and other documents. Apply with your chosen lender, and then begin the waiting process while the VA and your lender simultaneously appraise the property and determine whether you are financially sound enough based on their standards to receive the loan.
At this point, all that remains once you receive your acceptance is to close on the property. The lender will choose a representative of theirs such as an attorney or title company, and you will close as is the norm. The process can take several months, but the reward will be through living in your new home.