7 Steps To Getting a Veterans Affairs (VA) Loan

Veterans Affairs (VA) mortgage loans have become immensely popular in recent years due to the downward slide of the US economy. With the economy taking a downturn, banks tighten lending standards for conventional loans, thus making people switch to VA loans. Qualifying for a VA loan is much easier compared to a conventional loan, and people get a decent amount of mortgage options once they qualify for the loan.

VA loans offer lower-interest rates than most types of loans that are available on the market for the ‘full reasonable value’ of a given property. Along with that, a borrower doesn’t have to shell out a down payment as with other government programs like FHA, which asks people to make a minimum of 3.5% as a down payment. Before you go into details as to why VA loan is a better option, it is important that you first know what it is.

What is a VA loan?

VA loans are home mortgages, which are lent by a private lender on the guarantee of the US Department of Veterans Affairs. If you want to obtain a VA loan, then you must ensure your qualification for the same. Here are the steps that you must take to confirm your chances of getting a VA home mortgage loan:

  1. Determining Eligibility – If you are a veteran, reservists, or a member of the National Guard, then you can apply for a VA loan. Even the spouse of the military personnel who died in active duty or suffered severe injuries during the service can also apply. Active duty members can also apply after completing 6 months of service, whereas, for National Guard Members or Reservists, the period extends to 6 years unless they are called to active duty because then, the eligibility for getting the loan comes after 181 days of service. During wars, the members become eligible after 90 days of service.
  2. Pre-Approval Process – You need to provide your credit report in advance with all three credit-reporting agencies to determine your exact FICO credit score. A score of 620 or higher will make it easier for you to qualify for a VA loan.
  3. Decide on a home and make an offer – Find the right property based on your personal and financial criteria and make your offer, which should not be too low or high. The reason for keeping a balance is to stay ahead of the pack in bidding along with ensuring that you don’t end up overpaying for the property. Once that happens, you will have to deposit a down payment of $500 on the property.
  4. Signing the purchase agreement – You need to make sure that the two contingency provisions, one upon financing and another upon inspection are inclusive or amended to the purchase agreement. Getting a ‘pre-qualification’ letter won’t necessarily guarantee finance, so you must have an alternative in case that doesn’t happen. In case, you are pre-approved, then be ready for an extensive check performed by the VA loan expert on your credit rating and financial background. Upon completion, your lender is going to provide a conditional commitment to your loan amount.
  5. Offer Accepted – Once your offer is accepted, contact the lender and let him know. If the offer hasn’t been accepted, then provide your tax returns for the last 2-3 years, bank statements, and pay stubs to get your application completed and submitted again for approval.
  6. VA Funding Fees – There is a one-time funding fee, which you need to pay to the VA unless you are an exempt veteran.
  7. No down payment – 2.15% fee.
  8. 5-10% down payment – 1.5% fee.
  9.   <10% down payment – 1.25% fee.

Here is the fee structure for Subsequent Users:

  1. No down payment – 3.3% fee.
  2. 5-10% down payment – 1.5% fee.
  3.   <10% down payment – 1.25% fee.

The fee structure for Reserves/National Guard:

  1. No down payment – 2.4% fee.
  2. 5-10% down payment – 1.75% fee.
  3.   <10% down payment – 1.5% fee.

The fee structure for Subsequent Users for the category of Reserves/National Guard:

  1. No down payment – 3.3% fee.
  2. 5-10% down payment – 1.75% fee.

c.   <10% down payment – 1.5% fee.