Understanding the process of your homebuying journey is crucial to ensuring you have a smooth transaction.
Veterans and service members looking to utilize their VA loan benefit to purchase a home should understand that while this mortgage option is similar to other products on the market, there are a few unique steps.
Talk to a VA Lender or Real Estate Agent
Whether you should talk with a real estate agent or a lender first is a common question for many first-time homebuyers. There is no right-or-wrong way to begin this process, and homebuyers can opt to speak with either to start their journey.
However, most real estate agents want to see that you’ve prequalified and preapproved for a mortgage before looking for a home.
In this case, here are three reasons it may make sense to work with a VA lender first:
- Determine if you’re a good candidate for a VA loan
- Determine how much of a mortgage you can afford
- Connect you with agents experienced with the VA loan
Get Your Documents in Order
Your lender will likely ask you to provide these documents while getting your VA loan preapproval, so make sure to have them handy:
- Driver’s license or government-issued ID
- Pay-stubs and W-2s for the last two years
- Copy of your DD-214 or Reserve/Guard points statements
- Recent bank statements
- Disability award letters
Providing this paperwork gives insight into your spending habits, predicted income, service history, and more.
Getting preapproved for a VA loan is a crucial component in the homebuying journey. Preapproval will confirm your purchasing power and strengthen your offer to sellers and agents alike.
Home sellers expect offers to come from buyers who have already been preapproved. Make an offer without being preapproved, and it might get swept under the rug.
Top VA lenders can process a preapproval quickly. Lenders will need to know your homebuying goals, employment history, and credit history before preapproving you for a loan.
Begin House Hunting
Now that you’ve received your preapproval letter, you can begin searching for the perfect home.
Whether it’s a single-family home, a new build, condos, manufactured and modular housing, or a multi-unit property (maximum of four-units), the VA loan has you covered. However, be sure to discuss your plans with your lender beforehand to ensure they offer financing for your preferred property type.
Remember, VA loans are only intended for purchasing primary residences that you will live in full-time. You cannot use the VA loan to purchase a property solely for investment purposes.
Make an Offer
You and your real estate agent will work together to craft an offer on the home that matches the current market and recent home sales in your area.
If the seller accepts your offer, it’s time to get under contract. If the seller rejects the offer, it’s time to negotiate or continue to a different home.
After the offer is accepted, VA buyers will be informed by their lender of any closing costs and contract contingencies. The total sum of closing costs can vary depending on the lender you work with, where you’re buying, and more.
Typically speaking, most VA buyers will have closing costs anywhere between 3 and 5 percent of the total loan amount. However, buyers have the option to ask the seller to pay all loan-related closing costs. Sellers are permitted to pay up to 4 percent in concessions, which covers escrow expenses and more.
Once your home is under contract, your VA loan enters the underwriting phase. Underwriters will receive your contract and documentation to analyze and overlook your home purchase.
The underwriter’s primary job is to make sure the lender makes a solid investment and double-check that all the VA requirements are met.
The VA will assign an independent third-party appraiser to assess the value and condition of your property. This appraiser is in no way connected to your lender, and they work on their own timeline.
If the appraiser finds the property doesn’t meet the minimum property requirements, buyers can ask sellers to cover the cost of repairs.
Once both the underwriters and appraisers feel confident in your loan files, you’ll be ready to close on your VA home loan.
Close on your Loan
Your loan officer will review your Closing Disclosure with you shortly before your closing day.
This document will go over the final total of your loan, which details all your closing costs. After one last check of your income and employment status, buyers will be able to do the property’s final walk-through to ensure all repairs were completed correctly.
If everything looks good, you’ll sign all the final paperwork and receive the keys to your new home on closing day.