What You Should Know Before You Apply for a VA Loan

December 7, 2017

What You Should Know Before You Apply for a VA Loan

Serving your country should and does offer many rewards and opportunities including affordable home loans. Those rewards shouldn’t come with confusing guidelines, misrepresentations, hassles and headaches; yet this can often be the case with a VA mortgage. Here are a few tips to help guide you through this sometimes daunting process.

Buying a new home is exciting and fun, that shouldn’t change when you apply for your home loan mortgage. There are several things you can do to help yourself navigate through the options. This is also true for active duty service members, veterans and families looking to improve their financial future through home loan refinancing. Knowing how VA mortgages work will save you time and money. Getting answers to some of these common questions and misconceptions will help you prepare and get you ready for an approved VA mortgage.

First things first, understand the VA mortgage process before you ever start looking for a new home. Finding your dream house is always the fun part, but this can quickly turn into a nightmare once you realize that you are unable to obtain the home loan you need to purchase the property. Start the process by talking to a VA Mortgage expert. Here’s what you should know before looking for a lender:

  • The US Department of Veteran Affairs is not a bank or a lender.  There are several mortgage companies out there that look like an entity of the government, but the truth is, they are all private lenders. You can often tell this by the fact they have “.com” rather than “.gov” in their URL.
  • Be comfortable with your loan officer or mortgage advisor. Most companies will give you a free consult to help determine eligibility and options. Don’t feel obligated to work with the largest VA lender, sometimes it’s the smaller, local companies with the best options and customer service.
  • Visit the US Department of Veteran Affairs to help you determine if you’re eligible for a VA mortgage. You can obtain your Certificate of Eligibility (COE), but often the mortgage advisor you are working with will do this for you.

Once you’ve found the mortgage company that is the right fit for you, have an idea of what you’re looking for and ask for details on some important questions:

  • How much can I afford? Most mortgage advisors will give you a pre-approval letter.
  • Can I buy a condo with a VA loan? Condo developments must be VA approved.
  • Can I buy a fixer-upper property? An independent VA appraiser will determine if certain work is required prior to closing.
  • Can I build a house and have a VA construction home loan? There are limited construction loans available.
  • Can I purchase a foreclosure property with a VA home loan? Similar to a fixer-upper, some work may be required prior to closing.
  • What are the loan limits, and are there ways around these limits? The VA Loan Guaranty limit is $424,100; anything above this may lead to increased down payment cost.
  • How much money will I need to have for down payment and closing costs? There is often no down payment and low closing costs for VA mortgages.
  • How much is the mortgage insurance on a VA home loan? There is no mortgage insurance because these loans are guaranteed by the VA.

Understand some of the important do’s and don’ts, which apply to all home loans:

  • Do continue to pay all of your bills on time especially rent or mortgage payments.
  • Do contact your mortgage advisor prior to making an financial changes of any kind.
  • Don’t apply for new credit or open new accounts.
  • Don’t co-sign for any loans.
  • Don’t close any accounts or cancel any credit cards.
  • Don’t transfer money or consolidate debt.
  • Don’t deposit cash or untraceable funds.
  • Don’t change employment.

There are also several refinance options unique to VA mortgages including the VA Interest Rate Reduction Refinance Loan (IRRRL) and the VA cash-out refinance. You may also refinance a non-VA home loan like an FHA mortgage into a VA loan if your status has changed since the original mortgage was obtained. Some qualifying changes include, but are not limited to length of time in service or changes in marital status.

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