Six Easy Steps to Use a VA Home Loan
Out of all government-guaranteed home loans, real estate expert agrees that VA Home Loans are the best government guaranteed home loans available. It is surprising, especially when you consider that most veterans don’t use their VA home loan benefits. Many veterans do not know whether they qualify for these outstanding government loans.
Since their creation as part of the Servicemen’s Readjustment Act of 1944 to help veterans returning home from World War 2 buy a home, these loans have drastically improved both in scope and reach. Due to their incredible benefits, VA loans have since evolved and helped more than 22 million veterans achieve the dream of homeownership.
This is due to its amazing benefits offered by VA home loans which range from a no down payment requirement, lower interest rates, low monthly mortgage payments, no prepayment penalties, and no mortgage insurance premiums. These loans can also be taken out in either 15 or 30-year fixed rate mortgages.
In the following, we will cover VA home loans and the steps you can take to ensure that you qualify for the loan and enjoy its great benefits.
Step 1: Make sure you meet eligibility requirements
Before you do anything else, you must make sure that your military service meets the eligibility requirements outlined by the VA. These loans are for Veterans and Active Duty Service Members as long as they meet income, service, and credit score eligibility requirements. They include:
- Income Requirements
Anyone who wants to take out a VA home loan must make sure that their income is consistent and steady. Lenders will make this determination by looking at the applicant’s outstanding debts and other compensating factors. For more information, check out the VA residual income chart for more detail.
Incomes deemed eligible for a VA home loan include those that come from a full-time job, social security, retirement, and VA disability income. Some incomes must have existed for at least two years to be approved; these are incomes from a part-time job, 1099, self-employment, and seasonal jobs. In some cases, there is a three-year continuance requirement for incomes from child support and existing alimonies.
Some incomes are not eligible for the VA loan, including the GI Bill, Basic Housing Allowance, unemployment, cash payments, and workers comp.
- Service Requirements
Fulfilling a VA loan’s service requirements should be pretty straightforward for current and former military members since most of them already meet these eligibility requirements. These eligibility requirements include:
- Ninety consecutive days of Active Duty Service during wartime
- One hundred and eighty-one consecutive days of Active Duty Service during peacetime
- At least six years of service as a member of the National Guard or military reserves
- Surviving spouses are also eligible, as long as their significant other passed away during service or as a result of a service-related disability.
- Credit Score Requirements
As far as eligible credit scores are concerned, this is more of a lender to lender basis as there are no credit score requirements specified by the VA. Currently, VA Home Loan Centers has lenders who have a credit score requirement of 620. Applicants with lower credit scores can still apply for a VA home loan. However, the lender will look at other things when deciding, things like late payments, existing mortgages, and reported collections.
Step 2: Pre-Approval Process
After eligibility is determined, the applicant must get ahold of a Certificate of Eligibility (COE), which will show that the applicant is entitled to receiving VA benefits. From then, they will have to go through the Pre-Approval process, which requires that a lender talks with the applicants and get their credit score checked before pre-approving them for a set amount. However, it is essential to note that the applicant’s pre-approved amount are unchecked numbers that might change once all the information is confirmed.
Step 3: Find a Representative
Once the applicant receives a pre-approval letter and a COE, the next step is to find a Realtor® who will help them find the best deal available on a house that meets the applicant’s requirements. If you want to find the right Realtor® to meet your needs, VA Home Loan Centers works with a team of experienced Realtors® who can help applicants find their new home at a reduced cost.
Step 4: Eligible Properties
In addition to the income, service, and credit score requirements that were previously covered the applicant must also make sure that the property that they pick is eligible for the VA home loan. With properties which are eligible being:
- Single-family residences.
- Multi-family complexes, which can be up to four unit, if the applicant lives in one of them.
- VA Approved Condominiums.
- Double-wide mobile homes which are also on permanent foundations.
- Manufactured homes set on a permanent foundation.
All these properties must have no health or safety issues, as they would disqualify the property from a VA home loan. In addition, homes in flood hazard areas with no flood insurance, or in an Airport Noise Zone 3. Furthermore, other properties which are not eligible are cooperatives, timeshares, and non-VA approved condos.
Step 5: Property Appraisal
After finding a property that meets eligibility requirements the applicant will have to get the property appraised by a third-party appraiser. The appraiser will have to inspect the property and compare the property with other within the same market, by looking at trends and sales prices.
It is also recommended that applicants hire an independent inspector to inspect the property and making sure that it meets all health and safety standards as outlined by the VA. The inspector will conduct a more detailed inspection of the property by looking at its electrical systems for safety reasons.
Step 6: Sign Your Loan Documents
The last step in the VA loan application is to sign all documents and get it checked by an underwriter who will then verify its authenticity. They will do so by verifying the applicant’s income, service, and credit score, as well as the property’s eligibility. Once all these steps are done and all closing documents are signed and submitted, the applicant will turn into the owner of a new home.
Phil Georgiades is the CLS for VA Home Loan Centers, a government-sponsored brokerage specializing in VA home loans. He has more than 22 years of experience working in real estate at a professional level and his team of trained realtors and real estate agent can help you find your future home. Call us at (888) 573-4496.