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Six Easy Steps to Using a VA Home Loan

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Serving in the U.S. Military allows service members to gain skills in leadership, teamwork, and communication. It also comes with benefits to reward them for their hard work and sacrifice. Some of the most significant benefits include college tuition financing, travel discounts, and VA home loans. Many real estate experts consider VA home loans as the best government-guaranteed home loans available. 

The creation of VA home loans was to help veterans returning home from World War 2 in 1944 buy a home. Since their creation, VA home loans have helped over 24 million veterans achieve their homeownership dream. Usage of these loans has increased in recent years, with over 1.2 million VA-insured loans getting guaranteed in 2020 at $363 billion.

These loans are appealing because they offer some of the best benefits out of all government-guaranteed home loans. Some of the most significant benefits these loans offer are a no down payment requirement, no-prepayment penalties, no mortgage insurance premiums, and lower monthly mortgage payments. 

However, many veterans are still not using these loans, mainly because they are unsure whether they meet eligibility requirements. If you’re one of these Veterans and are not sure about how the application process works, here are six easy-to-understand steps to using your VA home loan benefits. 

Step 1: Determine VA Loan Eligibility 

Determining whether you meet the VA loan requirements is the first step of the entire process. Thankfully, VA eligibility requirements are created in such a way that you most likely qualify if you served in the military. VA home loans require that applicants meet income, service, credit score, and property requirements. However, property requirements are in step four, as they are not a basis for the applicant’s disqualification.    

Income Eligibility Requirement

For an applicant’s income to be deemed eligible, it must come from a reliable source with any compensating factors and outstanding debts also taken into consideration. A reliable income comes from:

Several incomes need to have a two-year continuance before applicants can use them to qualify for these loans. They include incomes from:

Some incomes need to have a three-year continuance to be deemed eligible for the VA home loan. These are incomes from child support and alimonies. Incomes that are not eligible for these loans are from unemployment, GI bills, Basic Housing Allowance (BHA), cash payments, and workers’ compensation. 

Service Requirements 

Eligible applicants must be Veterans, Active Duty Servicemembers, or eligible spouses. Also, they must meet at least one of the following requirements. 

Credit Score Requirements 

An eligible applicant must have a credit score that meets the lender’s requirements because, unlike other government loans, VA home loans do not have a credit score requirement. That decision is up to the lenders themselves. 

Therefore, experts recommend that applicants have a credit score of 620. Lower credit scores might qualify for the loan, although other factors are considered, including late payments, formerly reported collections, and existing mortgages. 

Step 2: Undergo the Pre-Approval Process

Before the applicant gets approved for the VA loan, they must go through the pre-approval process, giving them a preview of whether or not they qualify for the loan based on the information they provide. 

It is essential to know that the pre-approved amount that the applicant gets is not final, as none of the information provided has gone through confirmation.  

Applicants are also required to apply for a Certificate of Eligibility (COE), which will confirm that they meet all the VA eligibility requirements previously mentioned. 

Step 3: Find a Representative 

Once the applicant gets a pre-approval letter and a COE, the next step is to start looking for a Realtor® using the information already provided. The realtor’s job will be to represent the applicant and find them the best deal for a home that meets all of the applicant’s requirements and budget. 

Step 4: Find an Eligible Property   

Finding a property that meets eligibility requirements set by the VA is important, as this will determine whether the property can be bought with a VA loan or not. VA eligible properties include:

Also, it must have no health or safety hazard issues. It also must not be located in a flood hazard area without flood insurance. Properties not eligible for the VA loan are timeshares, non-VA-approved condos, and cooperatives. 

If this is the applicant’s first VA loan, they should not worry about VA loan limits. However, borrowers with over one active VA loan are still required to purchase a property under the VA’s loan limits for that specific county.

Step 5: Perform a Property Appraisal   

Once the applicant finds a property that meets all the VA’s eligibility requirements, they must hire a third-party appraiser. The appraiser will inspect the property and determine how much that property is worth by comparing it with similar houses in the area, market value trends, and sales prices. 

Experts recommend that applicants hire an inspector who will look at the property and ensure that it meets all the health and safety requirements set forward by the VA. This includes inspecting the property’s structure, electrical wiring, and foundation.

Step 6: Sign Loan Documents

Once all the previous steps are met and accounted for, the next step will be signing all closing documents. An underwriter will verify the accuracy and validity of all documents provided, including making sure that applicants meet all income, service, credit score, and property requirements. 

Once the underwriter approves everything, the next step will be for the applicant to sign all closing documents and pay for the closing costs. From then on, the applicant will be a proud new homeowner.   

Phil Georgiades

Phil Georgiades is the CLS for VAHomeLoanCenters.org, a government-sponsored brokerage specializing in VA home loans. Phil has worked as a real estate professional for over 22 years. For more information regarding VA loans or to apply for a VA home loan, call us at (877) 432-5626.

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