The American government takes care of its veterans. A VA loan is one such endeavor, enabling veterans to purchase a home/ property with a $0 down payment.
Read on to understand how you can qualify for a VA loan in 7 simple steps.
What is a VA home loan
As the name indicates, it is home loan available to those who have served or are presently serving in the armed forces. Also, this kind of loan is guaranteed by the government, leading to many advantages for the home buyer.
Key highlights of VA loan:
- Only available to American citizens.
- Eligibility criteria includes a minimum period of service, depending on the year and place of service.
- Also available to surviving spouses of veterans in some cases.
Main benefits of VA loan:
- $0 down payment.
- $0 insurance for private mortgage.
- Buyer friendly interest rates (typically .5 to 1% lower than conventional loan rates).
- No penalties for early loan closure and set limits on closing costs.
Together, these benefits can collectively lead to thousands of dollars of savings every year!
STEPS TO APPLY FOR A VA LOAN
1. Find an approved lender
Not every bank or financial institution is authorized to provide a VA loan. In fact, the lender needs to be specifically approved by the U.S. Department of Veterans Affairs. Failing this, you as a buyer will not be able to reap the benefits of VA loans!
2. Procure a COE
A COE (Certificate of Eligibility) is like a stamp of approval that you quality to apply for a VA loan. For this, you may be asked to provide details about your service in the armed forces.
A COE is typically facilitated by the VA loan provider. Note that a COE is not approval for the loan itself. It is a pre-approval of sorts, and you will still need to go through the formal VA loan process after you receive the COE.
3. Understand your pre-qualification amount
While pre-qualifying through a COE is critical, it can also help you understand the amount you pre-qualify for, based on your lender. For this, you may be asked to provide details on your income, expenses, credit history, etc. While this step is optional, it is strongly recommended so you can understand your purchasing power.
4. Find your preferred choice of home or property
This is the actual house hunting process. In some cases, it may be completely independent of your VA loan process. In some cases, sellers may be more inclined to sell to veterans, and even be ready to pay for real estate fees and closing costs. So do look for VA-specialized real estate agents who can put you in contact with such sellers.
Once you zero down on your choice of property, it is strongly recommended that you initiate a home inspection. In fact, some VA lenders may even mandate one. A home inspection can help you identify any safety hazards on site, so there are no surprises at a later stage.
5. Sign a formal purchase agreement
Once the home inspection comes back with no red flags, a veteran will re-iterate the intention to buy, through a formal purchase agreement. VA lenders will also need this purchase agreement to initiate a formal loan process.
6. VA loan application
This is the second most important part of the loan process (after the COE). With this, you formalize your intention to purchase a home through a VA loan.
This step also has 2 parts:
- Loan application, initiated by buyer. Here, you will submit documents to the VA financer for loan approval. (If you’ve already applied for a pre-qualifying amount with the same financer, this step can be faster and with minimal surprises.)
- VA appraisal, initiated by the lender: Here, the lender appoints a certified VA appraiser to evaluate your home, in line with government approved standards. Do note, this is not the same as a home inspection. A home inspection is optional and initiated by the buyer, so you assured there are no surprised before you purchase a home. A VA appraisal is mandatory and initiated by the lender, so the purchased property meets VA standards.
At the successful end of this step, a VA underwriter will provide their stamp of approval for your loan application.
7. VA loan application closure
Once the underwriter approves your loan application, the final step is to get your signature, so you can formally close on the loan. In this final step, your VA financer will also share a closing disclosure agreement, listing the formal terms and conditions of the loan, closing costs, etc.
Congratulations, as you are now the proud owner of your chosen property!
VA loans have consistently been the preferred mortgage for American veterans. Besides the many benefits on offer, they also have a straightforward process as described above.