Purchasing your next home through the VA is very similar to funding through any other loan program. However, there are some minor differences, such as documents and records required to submit your loan. The purpose of this article is to take the VA buying process, break it down, and provide advice that will hopefully simplify the journey towards financing a new home.
- Find Out if You are Eligible to Receive the VA Home Loan. Find a real estate agent to work with, preferably one who is used to working with homebuyers who use the VA loan. See the article titled “VA Loan Eligibility” to learn about additional requirements necessary to see if you qualify for a home loan through the VA.
- Find a Lender. Similar to choosing a real estate agent, you’re going to want to find a lender who not only participates in the VA program, but who is knowledgeable about the process. This would be a good place to “pre-qualify” for your loan, or see how big a loan you can afford. Take discount points, closing costs, and other fees into account, and shop around before you choose a lender so you can find interest rates that fit comfortably into your budget.
- Obtain Your COE. Personally, I think a veteran should do this as soon as they decide that they want to fund through the VA. Your COE outlines your VA benefits and verifies whether you meet the requirements necessary to receive a VA loan. I believe this should be done before you actually get the process started simply because sometimes it takes a while for the VA to send you your COE. If you find that it’s taking more than two weeks to receive your COE, contact your state senator and request that he contacts the VA and intercedes on your half in order to speed up the process.
- Find a Property that You Wish to Buy, and Sign a Purchase and Sales Agreement. This is the fun part! Work with your real estate agent to find a home and negotiate a sales contract. Make sure that the contract includes a “VA Option Clause.” Here’s an example: “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 to include a clause that allows you to escape the contract without penalty in the event that you do not get approved for the VA loan.
- Apply for the VA Loan. Work with your lender to find out which documents and records are required, and fill out a loan application. Typically, the lender will request items such as your COE, DD-214, the purchase and sales agreement, driver’s license, pay stubs, W-2, federal tax returns, and bank statements.
- Loan Processing: At this point, the lender looks at all of the documents that you have sent them and they order a VA Appraisal. The appraiser will send your lender an appraisal review, and from there the lender will determine whether the loan should be approved or denied.
- Closing: Congratulations, your loan was approved! The lender will assign a title company or an attorney to conduct the closing. The individual delegated to perform the closing will determine a date and time for the property to be transferred.
Financing a new home can be a stressful and overwhelming process. However, the process only goes as quickly as you make it. Be sure to have your COE and your DD-214, along with other lender-specific documents ready to send to your lender as soon as possible so that your loan application is submitted quickly. I hope this article made the whole process seem a little less daunting, and that your experience with the VA is a pleasant one!