Getting from start to finish using a VA loan is very similar to any other home buying process. The difference with the VA loan comes in the form of additional benefits to the buyer, such as no down payment required and a better interest rate.
It is helpful to know exactly what will happen as you progress through your VA loan process.
Determining Eligibility and Pre-Approval
Before you start searching for the perfect home, it’s good to have a conversation with your family and your lender about what you should look for during your search. Your VA eligibility and your budget will help you decide how much house you can afford.
This is also the time to get a pre-approval letter from your lender. This letter is provided after a basic review of your credit and employment. You can expect to provide some documentation showing your military service (to help determine VA eligibility) at this time. The pre-approval letter strengthens any purchase offers that you plan to make because it shows sellers that you are ready to complete the sale.
Finding Your Home
This can be the most fun (or frustrating) part of the home buying process. Working with a good real estate agent is a great way to avoid any potential frustrations by having an experienced professional guiding you through the process. You should look for an agent who has done VA loans before. This will help you by narrowing down the houses that you consider to those that would be right for the VA loan. Don’t be afraid to ask for recommendations or referrals to find the right fit.
Most homes, including single-family homes, condominiums, new construction, manufactured homes, and multi-unit properties (up to four units) can be purchased with the VA loan. The only requirements are that the buyer intends to live in it as their primary residence and that the home meet Minimum Property Requirements (MPR). If the home is more of a “fixer upper” and doesn’t meet these requirements, you may still be able to purchase it using a VA loan, but additional documentation will be needed. Having an experienced real estate agent and working with a lender who specializes in VA loans can help this process.
Making an Offer
Once you find a home that you love, it’s time to make an offer. If you are working with a real estate agent, they can help you come up with a reasonable offer. Things to consider are sales price, assistance from sellers to pay agent commissions or other closing costs, items that you would like the seller to repair before the sale, and the length of time you would like to take to get to closing.
You can also include other contingencies in your offer, such as making the purchase require a satisfactory home inspection. This protects you, the buyer, from having to go through with the purchase if the home inspection finds any major problems that the seller does not want to fix.
Negotiating is common during the home buying process and you may go back and forth a few times before you settle on a purchase contract that both buyer and seller like. This is where having a real estate agent working on your behalf can be so beneficial.
Underwriting
With an agreed upon purchase contract, the VA loan process goes over to the lender to make sure that your financing is ready. You will start hearing more from your loan officer and their administrative team as they prepare your file for underwriting.
Underwriting is the detailed review process that looks at your financial situation, ability to pay back the loan, and ultimately approves your purchase. They will ask you to provide financial statements for your bank accounts, explain any recent unusual deposits or withdrawals, and verify income. It’s important to keep these lines of communication open in order to keep the process moving smoothly.
The VA also requires an appraisal on the property to make sure that it is worth what you plan to pay. You can expect to pay the cost of this appraisal during your loan process, although it can sometimes be covered by the seller at closing. This appraiser, who is contracted by the VA and not your lender or agent, looks at the physical condition of the property, comparable homes in the area, and makes sure the home meets the MPR standards.
Closing
Congratulations! You made it through the VA loan process and are ready to get the keys to your new home. Once the underwriters are happy with your loan application and give the final approval, you will receive a Closing Disclosure document that outlines all of the specifics of your loan. This often looks similar, but not exactly the same, as estimates provided earlier in the loan process. These differences come from fluctuations in interest rates as the market changes and other fees that are incurred during the loan process.
Before getting the keys to your home, you’ll have the chance to walk through it one more time to verify any repairs were done.
Getting to closing is a big accomplishment and means you are officially a homeowner. At closing you will sign the official paperwork completing the sale, receive keys, and be ready to celebrate in your new home.