Thinking about applying for a VA loan to purchase your next home? Getting pre-approved is a smart step that can save time and increase your buying power.
As a veteran, active-duty, or eligible surviving spouse of a US service member, VA loans are one of your most valuable benefits. These mortgages are backed by the US Department of Veterans Affairs (VA) and designed to make buying a home easier and more affordable for those who qualify.
A few of the main benefits of VA loans include:
However, in addition to strict eligibility requirements, VA-backed mortgages have tougher appraisal requirements than a conventional home loan, and you may be responsible for paying VA funding fees up to 3.6 percent of the loan amount.
Once you have confirmed eligibility for a VA loan, you’re ready to take the next step and get pre-approved. There are several reasons why it makes sense to get pre-approved for a mortgage before you start house hunting.
For example, the pre-approval credit check will identify any credit issues that need to be resolved. Pre-approval will also help you determine how much house you can afford and give you an estimate of how much the lender will let you borrow.
If you are concerned that you may not be financially ready to buy a home, using a mortgage calculator before you meet with a lender is a great way to gauge how a mortgage will impact your monthly cash flow and debt-to-income ratio.
In addition to financial insights, mortgage pre-approval can give you an edge over other buyers in competitive markets. If a seller knows you have a lender on board who has pre-approved you for a mortgage, your offer will generally be more attractive than an offer from a buyer who still needs funding.
NOTE: The VA loan application process is more complex than a conventional mortgage. Working with a lender that specializes in VA loans is the best way to maximize your benefits and have a positive experience.
Having the right documents on hand will speed up your pre-approval application. To apply for a VA loan, you will need to provide your lender with:
When working with customers on their VA loan applications, we are often asked to explain loan limits and funding fees.
Unlike conventional loans, VA loans don’t have a set loan limit for eligible borrowers with full entitlement. This means you can borrow as much as your lender approves. However, if you are using remaining entitlement from a previous VA loan to purchase a new home, loan limits may apply based on the county loan limits set by the Federal Housing Finance Agency (FHFA).
The VA funding fee is a one-time payment that helps keep the VA loan program running. The fee is a percentage of the loan amount, not the purchase price, and can range from 0.5 percent to 3.3 percent based on how much money you put down and whether you have previously purchased a home using a VA loan.
Most VA home loan borrowers are required to pay the funding fee, but some veterans may be exempt. Work with your lender before finalizing your mortgage to determine if you qualify for an exemption.
Once your pre-approval application is approved, it’s time to start house hunting.
We recommend working with a real estate agent with VA loan experience who can help you negotiate seller concessions and repairs, navigate VA loan appraisal and inspection requirements, and prepare for closing. First Federal Bank Mortgage Lenders partners with Clever Real Estate—a nationwide network of more than 14,000 highly rated agents who can take the stress out of finding your next home.
Once you have a contract on a home, you will need to schedule an appraisal and a home inspection. The appraisal is a property analysis that the lender will use to confirm the home’s fair market value and how much they are willing to lend you to buy it.
VA loan appraisals are more rigorous than those required for conventional mortgages. The Department of Veterans Affairs publishes a list of minimum property requirements (MPR) that inspectors will use to determine whether the home meets structural, safety, and sanitation standards.
If the home doesn’t appraise at or above the contract price or it doesn’t meet the MPR, you have a few options:
Once you have a favorable appraisal and inspection report, your lender will prepare for final loan approval and closing on your new home. This step includes a final credit check, closing cost disclosure, and a list of documents you will need to bring on closing day.
First Federal Bank Mortgage Lenders is nationally recognized as one of the top VA lenders in the United States. Our mortgage lenders have decades of experience and are here to provide advice and guidance and help you find the most competitive rates for VA loans.
Contact us to learn more about applying for a VA loan or download VA Home Loans 101: Your Complete Guide, our essential guide to understanding the VA home loan benefit and how to qualify.