Since 1944, the VA Loan Guaranty program has helped eligible veterans, surviving spouses and active duty servicemembers both buy homes and refinance them with access to affordable home loan financing and low downpayment hurdles.
In addition, because mortgage insurance is never required with a VA home loan, VA mortgage borrowers typically pay less per month than borrowers using a comparable conventional or FHA home loan.
Obtaining a VA home loan is much like obtaining any other type of home loan. There are application steps, and approval process, and a closing and funding. With the VA home loan program, however, there are certain steps specific to VA mortgage guidelines.
First, locate a VA-approved lender.
Not all mortgage lenders make VA home loans so make sure to specifically ask whether your bank participates in the VA Loan Guaranty program. Furthermore, mortgage lenders offer varying mortgage rates, loan fees and loan terms. Be sure to comparison shop.
Next, if you're a home buyer, consider getting pre-approved for your VA home loan. With a pre-approval, your lender can tell you with reasonable certainty whether your home loan will be approved, plus you'll get a feel for the monthly housing payment for a given home.
Lastly, you'll want to make sure you have a VA Certificate of Eligibility (COE).
The VA COE is exactly as it sounds -- it's proof that you are eligible for the VA home loan program. If you don't have a COE, ask your lender to procure it on your behalf. Lenders have access to an online system which determines VA home loan eligibility and can issue the required certificate.
Note that surviving spouses must apply for a COE by mail using VA form 26-1817.
After you've found a home and bid on it, make sure that your home purchase contract contains specific VA mortgage verbiage.
For example, adding the "VA Option Clause" to your purchase and sales agreement can protect you during the home loan approval process, and is a step recommended by the Department of Veteran Affairs. The VA Option Clause grants VA buyers the legal freedom to choose to not purchase a home if the VA appraisal determines that the home is worth less than the contracted sales price.
If you are a home buyers and you go to contract on a home in Bethesda, Maryland, for example, priced at the VA local loan limit of $838,750, but the home appraises for less, via the VA Option Clause, you can legally "back out" of the contract.
The VA offers sample language for the VA Option Clause on its website :
"It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise of be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs."
In addition, consider adding specific language to your contract in the event you cannot secure VA financing. This is sometimes called a "mortgage contingency" or "financing contingency".
Next, begin your formal VA home loan application. The lender with which you were pre-approved will already have your "notes" on file and will be able to move your home loan forward. However, now is a good time to shop VA lenders to determine who can offer your best financing.
The formal application process often requires providing W-2, paystubs and a credit report, as well as the aforementioned Certificate of Eligibility.
Next, you should select a lender with which to work. As part of this step, you notify a bank in writing of your intent to use their services. Sometimes, this includes locking a mortgage rate. Other times, it does not. Your lender will often offer advice on whether it's best to lock a mortgage at this time.
Once the lender has committed to funding your purchase, the underwriting and approval process begins. This includes the ordering of a home appraisal, the verification of income and credit, and the review of VA home loan eligibility.
Note that the appraisal does not serve as a replacement for a home inspection and, thus, the VA does not guarantee the condition of the home under contract. It's your responsibility as a home buyer to have the property properly inspected.
After approval, you home closing will proceed as planned, and you will sign the mortgage, the note, and related documents and disclosures. When closing is complete, and after the loan has "funded", the home loan process is complete.
The U.S. housing market has shown steady signs of improvement since October 2011 and values are expected to rise over the next 18 months, too. For first-time buyers using the VA home loan program, and for eligible move-up buyers, too, the VA home loan program exists as a flexible and inexpensive way to buy a home.
To see today's VA mortgage rates are, start online. Quotes are fast and free, and no credit check is needed.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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