Step-by-Step Guide on Buying a House With a VA Loan
May 25, 2022
VA loans are an invaluable source for financing a home purchase for eligible veterans. The process of getting a VA loan is not that different from getting a normal loan but there are some key differences to keep in mind. If you are interested in buying a house with a VA loan but are unsure of where to start, this guide is for you. There are many benefits to buying a house with a VA loan, such as no minimum down payment, and no monthly mortgage insurance premiums. However, the process is not without its challenges. In this blog post, we outline the eight steps in buying a home with a VA Loan.
First Time Home Buyer VA Loan Tips: A Guide
1. Get a Certificate of Eligibility
The Department of Veterans Affairs offers VA loans to servicemen and women who have served in the military. However, not everyone who has served is able to qualify for these loans. Service members must fulfill certain conditions in order to be eligible for the VA loan. The first step to buying a house with a VA loan is to get a Certificate of Eligibility (COE).
A COE is a document created by the VA that informs mortgage lenders that you are eligible to get a VA loan and the likely amount the VA will guarantee for the loan. You can apply for a COE directly on the eBenefits website or you can print out a form and mail it in. On average, it takes the VA 30 days to decide on an applicant’s eligibility. COEs don’t expire but you may need to reapply if you went from being on active duty to being a veteran.
Here is everything you need to apply for a COE.
2. Review Your Budget
Getting approved for a COE does not mean that you will be automatically approved for a loan. A COE only allows the lender to see that you are eligible for a VA loan but it will be up to the lender to ultimately determine if they want to give you a loan and at what interest rate. Before shopping for a lender, you need to know what type of budget you are working with.
Start by creating a list of your current monthly income and expenses. Then, you can begin to look at your options for a mortgage loan. There are many different types of mortgages and lenders out there. You need to find the one that best suits your budget and financial needs. You should also take into consideration the additional expenses that come with buying a house such as property tax and closing fees. Once you know what type of budget you are working with, you can start to look for lenders.
3. Find a Mortgage Lender
Comparing different lenders is a vital step in the process of buying a house. As a first-time home buyer, you won’t be familiar with all of the different types of lenders out there. Different lenders have different interest rates, fees, and requirements. In 2018, the Consumer Protection Financial Bureau reported that 30% of borrowers neglect to compare the rates and fees of different lenders. This is a crucial mistake because it can end up costing you thousands of dollars in the long run.
Lenders provide loan estimates that disclose the interest rate and the fees that come with the mortgage loan. Getting multiple loan estimates is a great way to shop around for a mortgage. In order to provide a loan estimate, lenders will need to check your credit score. You may be concerned about your credit score taking a hit if several lenders conduct an inquiry, but the lenders perform a soft inquiry and it only counts as one inquiry if multiple do so within a 45-day period.
4. Get Pre Approved
After you have found a few lenders that you are interested in working with, the next step is to get pre approved for the loan. Pre Approval means that the lender has checked your credit score, employment history, and financial information and they have determined that you are eligible for a loan up to a certain amount. Getting pre approved gives home buyers leverage when searching for a home. Sellers are more likely to accept an offer from a pre approved buyer because it shows that they are serious about the purchase and the financing is more likely to go through.
In today’s seller’s market, pre approval can also help you stay competitive against other buyers who may be interested in the same property. Pre Approval is only valid for a certain amount of time (30 – 90 days). Fees for pre approvals may cost hundreds of dollars, and no one wants to see their pre approval go to waste.
5. Work With a Real Estate Agent
There are many things to consider when looking for a house like the location, the size of the house, the type of home, and the condition. Not to mention, setting up open houses and going on tours can be time-consuming. This is where a real estate agent comes in handy. A good real estate agent will save you time and effort by doing a lot of the legwork for you so you don’t have to put your life on hold while searching for a house. They also have expertise in the local housing markets and if they have knowledge about the VA loan process, they can be a great assistance when trying to get the most benefits out of the loan.
Need a good real estate agent? Negotiators are a group of real estate agents that have all proven themselves to be top performers in their local real estate markets. By hiring a Negotiator, you’ll have someone on your side who has a wealth of experience, real estate expertise, and an unrivaled work ethic working to make the home buying process as smooth as possible. Learn more about Negotiators here.
6. Find a Home
Now you get to search for your new home. With a great real estate agent doing the legwork and presenting you with several options, it’s time to enjoy the process of narrowing down your choices to find the home that is perfect for you. For many, this is the fun part. It’s important to share any concerns or questions that you have about a property with your real estate agent so they can address any potential issues with the properties. Be strict with your requirements but also try to be realistic. It may be difficult to find a home that has everything on your list but try not to compromise on the things that are most important to you.
7. Make an Offer
Making an offer is a crucial step in the home buying process. Your offer is the seller’s first impression of your interest in the property and will set the tone for the rest of the negotiation. An offer usually contains:
- Amount of money you want to offer on the house
- Amount of earnest money deposit
- Preapproval letter
- Expected closing date
- Expected Move-in date
- Deadline to respond
Your real estate agent should have a strategy to get the seller to seriously consider your offer. It’s their job to get you the best deal possible and they will likely have a lot of experience in negotiating. They also should be familiar with the general terms of VA loans to know what they will allow in the offer and what they won’t.
8. Appraisal and Inspection
Assuming the offer is accepted by the seller, the next step is to sign a purchase agreement. Mortgage lenders will use this agreement to order an appraiser to come out and assess the value of the property. The appraiser has to be VA-approved to make sure the property meets the VA’s minimum property requirements along with estimating the market value. An appraisal does not take the place of a home inspection.
A home inspection is an in-depth examination of a property that is conducted by a certified professional and it is recommended for all buyers, even if the property is brand new. The inspection will uncover any issues with the property that may have been missed by the appraiser. Home inspections can uncover life-threatening safety hazards that may be a deal-breaker.
9. Closing on the house
As the appraiser is examining the property, you will be sending documents to your lender to get final approval for the loan. Once the appraiser and the lender give their approval on the property and your eligibility, the underwriter will give his final decision on your loan application. Once your loan is hopefully approved by the underwriter, all that is left is closing. Closing is when the property officially changes hands from the seller to the buyer.
Review the documents at closing carefully. You will get a closing disclosure from your lender that outlines all of the final loan terms and closing costs. If the closing disclosure doesn’t match with the loan estimate, then the lender is required to explain the changes to you. After signing the documents and paying any closing costs, you will get the keys to your new home.
Ready To Start Your Home Buying Journey?
If you’re a veteran or active member of the military, buying a house with a VA loan is an excellent way to achieve homeownership. Although the step by step guide above is representative of many home buying journeys, it doesn’t represent every home buying situation. The most important thing is to do your due diligence when it comes to VA loans and work with experienced real estate professionals who can help you all throughout the process.