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If you are a Veteran,
Could a VA Loan Help You?
If you are an eligible veteran, the U.S. Department of Veterans Affairs (VA) may be able to assist you with a loan for the purchase of a home. The VA guaranty loans encourage lenders to offer loans to veterans by protecting lenders against loss if the borrower cannot make the payments. VA loans are particularly beneficial to those veterans that do not have much cash available. There are five basic steps when obtaining a VA backed home loan. Although there are lots of details within each step and some may overlap, here is a basic overview of how the process works.
The veteran selects a home they are interested in. The purchase and sales agreement should contain a VA option clause. The contract must also allow the veteran to "escape" from the contract without penalty if he/she is unable to obtain a VA loan. Some veterans prefer to contact a lender to get "prequalified" prior to searching for a home. Veterans may also apply for a certificate of eligibility prior to looking for a home or contacting a lender.
Contact a lender to apply for the loan.
At this point, if the veteran has not already obtained his/her certificate of eligibility, they will need to. The lender may be able to obtain it off the internet or the veteran may have to complete a form and send it to the appropriate eligibility center. In either case the lender will be able to assist in the procedures of how to obtain a certificate of eligibility. The lender will complete a loan application and gather supporting documentation, like pay stubs and bank statements. It is important for veterans to know that lenders set their own interest rates, discount points and closing points.
The lender will "process" all credit and income information. Lenders are allowed to use VA approved automated underwriting systems. The lender will also order a VA appraisal. VA's appraisal is not a home inspection or a guaranty of value. It is an estimate of the market value as of the date the inspection is made comparing it to similar homes that have recently sold in that area. Although the appraiser does look for obviously needed repairs, VA does request that appraisers not address cosmetic items. VA does not warrant the condition of existing homes. The appraiser is a licensed individual who does not work for VA but is chosen by VA to assure his/her review is unbiased in any way. The lender can not request which appraiser to use, they are assigned on a rotation basis.
The lender will "underwrite" the loan. Lenders are allowed to use VA approved automated underwriting systems. The lender will also order a VA appraisal. VA's appraisal is not a home inspection or a guaranty of value. It is an estimate of the market value as of the date the inspection is made comparing it to similar homes that have recently sold in that area. Although the appraiser does look for obviously needed repairs, VA does request that appraisers not address cosmetic items. VA does not warrant the condition of existing homes. The appraiser is a licensed individual who does not work for VA but is chosen by VA to assure his/her review is unbiased in any way. The lender can not request which appraiser to use, they are assigned on a rotation basis.
The final step is the "closing". for loans that meet VA regulations and guidelines. The lender chooses the title company, attorney or if their representative will conduct the closing. The title company, attorney or lender representative who will handle the closing will coordinate the date and time.
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