VA Loan Process
Most VA home loans are handled entirely by private lenders such as iDirect Home Loans. The VA doesn’t typically get involved in the loan approval process. VA “stands behind” the loan by guaranteeing a portion of it. If something goes wrong and you can’t make the payments anymore, the lending institution can come to VA to cover any losses they might incur. The VA loan guaranty is the “insurance” that VA provides the lender.
In most cases, you need to follow these steps to get a VA home loan:
Find a Lender & Get Pre-Qualified
Locate a lending institution like iDirect that participates in the VA program. You may want to get “pre-qualified” at this point, find out how much of a loan you can afford. Lenders set their own interest rates, discount points, and closing costs. The lender will also obtain your Certificate of Eligibility (COE). The COE verifies that you meet eligibility requirements for a VA loan.
Complete your Loan Pre-Approval
Work with your mortgage loan originator to complete a loan application. Make sure to gather and provide the needed documents, such as pay stubs and bank statements. Keep in mind the more documentation you provide up front, the smoother the loan process will be once you have found a home and are under contract.
Find a Home
Find a real estate professional to work with. Perhaps a friend has someone to recommend. Or you could look under “Real Estate” in your yellow pages or on the web. Your iDirect mortgage loan originator may also have a trusted resource in your area they can recommend.
Sign a Purchase Agreement
Work with a real estate professional and negotiate a purchase agreement. Make sure the purchase and sales agreement contains a “VA Option Clause.”
Here’s a sample of a “VA Option Clause”:
“It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs.”
You may also want the purchase agreement to allow you to “escape” from the contract without penalty if you can’t get a VA loan.
Loan Processing & Closing
The lender orders a VA appraisal and begins to “process” all the credit and income information.
(Note: VA’s appraisal is not a home inspection or a guaranty of value. It’s just an estimate of the market value on the date of the inspection. Although the appraiser does look for obviously needed repairs, VA doesn’t guarantee the condition of the house. The appraiser, who is licensed, is not a VA employee. The lender can’t request a specific appraiser. Assignments are made on a rotating basis.)
The lending institution reviews the appraisal and all the documentation of credit, income, and assets. The lender then decides whether the loan should be granted.
The seller chooses a title company, escrow agent or an attorney to conduct the closing. This person will coordinate the date/time of closing, and the documents and funds that must be exchanged to assure the property is transferred. If you have any questions during the process that the lender or title company can’t answer to your satisfaction, please contact VA at your Regional Loan Center.