Military buyers have access to the best home loan in America – a VA Loan. In addition to providing a way for military members to buy with no money down, VA loans also have very flexible guidelines and affordable terms. Therefore, this option is quite the weapon to have when it comes to buying a home. Once the decision has been made to purchase a new home, it is helpful to understand the VA loan requirements and process.
VA Loan Process
We feel that the VA home loan process is more than just getting a payment and rate. Although these are very important steps, OVM Financial believes in providing education, strategies, and an efficient purchase process. We are far from the larger, call center type of mortgage lender. Conversely, your OVM loan officer thoroughly discusses your loan options and goals so that you are a knowledgeable, prepared, and happy buyer. The initial VA loan process looks like the following:
- Complete Loan Application – in person, over the phone, or online
- Answer VA related questions – list provided further in article
- Credit review
- Up-front pre-approval
- Discuss goals with buyer and Realtor
- Loan documentation requested
- Qualification letter provided
- VA certificate of eligibility retrieved – We will request for you
- VA loan terms and purchase plan are discussed
Like the military, we believe preparation is key to a great result. That is why the above initial steps are followed thoroughly up-front. The result is a prepared, educated, and qualified buyer.
VA Loan Documentation
The best thing about our VA loan process for active military is that we keep it as streamlined as possible. For buyers currently in the service, there are only a few items typically required. It is highly recommended to provide these items right at the beginning which will save time and solidify your qualification:
- Current LES
- Most recent monthly bank statement
- Photo identification
- Military transfer orders – if transferring to a new base
- Signed and dated Statement of Service Letter (Ask if needed)
VA Loan Requirements
As mentioned above, VA home loans have very sensible and flexible guidelines. When it comes to qualifying for a VA loan, the approval depends on the overall buyer details. The individual areas include credit, debts compared to income, and assets. VA credit scores could be as low as 600 with compensating factors in other areas. VA loan requirements are not just about the credit score though. The overall strength of credit is important. Additionally, the higher the score, the more flexible the guidelines can be. Believe it or not, it is even possible to buy a home with a VA loan after a previous bankruptcy, foreclosure, or short sale.
In addition to a buyer’s credit report and credit scores, the overall payments compared to income is part of qualifying. This is called a debt to income ratio. Higher debt ratios mean more risk to a lender. However, with compensating factors, an approval is possible with higher ratios. Many lenders cap the ratio at about 43 – 45%, yet we are often able to approve buyers in the mid 50% range. Another important factor in VA loan qualification is residual income. Residual is the amount of monthly income left after paying monthly expenses, but don’t worry about calculating your ratio, residual, or figuring the VA loan requirements yourself. Your OVM loan officer will figure all of these qualifications and walk you through the process.
Be Ready for These Questions
VA requires additional questions compared to other mortgage loans. So, you can be prepared by knowing answers to the following VA questions. Providing these answers at application save time in the VA loan process as well as makes for accurate up-front loan approval:
- Veteran’s nearest living relative – name, address, phone, and relation
- Service entry date
- Have you used a VA loan before
- Is there an existing VA loan?
- Has there been a previous VA foreclosure or short sale?
- Do you pay childcare expenses?
- Will you be present for closing? Would need to know if a POA is needed
- Do you have transfer orders?
Want a True No Money Down VA Home Loan?
One of the best features of a VA loan is the fact that it can provide 100% financing, but in addition to financing the whole purchase price, it also allows for financing closing costs. Just like any other mortgage, there are closing costs. These costs include a VA funding fee as well as appraisal, title search, attorney fee, and more. Don’t worry; your loan officer will thoroughly discuss these. If you want to learn more about VA closing costs and including them in your VA loan, check out this article, “How Military Buyers Can Include VA Closing Costs in Their Purchase.” It explains how VA loan requirements allow for creative financing options such as: buying out a lease, paying off debts, and more.
Are you ready to start the VA loan process or maybe just have some questions? Give one of our OVM loan officers a call.