A VA loan can be the answer for home ownership for veterans and their families, but there are very specific steps that need to be taken to apply. In this blog we will go over the steps taken to apply for a VA loan.
Step 1: Apply for VA loan eligibility
To qualify for a VA loan, you’ll first need to prove your military or veteran status with a Certificate of Eligibility (COE). A COE indicates:
- Your eligibility for a VA loan
- The amount of guaranty (loan) you’re entitled to
- How much of your VA entitlement you have already used
Your loan officer can assist you in obtaining your COE – you’ll just need to provide your full name, Social Security Number, date of birth and military background.
If you are separated or retired from the military, you’ll also need to request a copy of your DD-214 (Certificate of Release or Discharge from Active Duty) . Keep in mind that this process could take as long as four weeks.
If you are currently in the Reserves or National Guard, you will need to provide a Statement of Service signed and dated by your Commanding Officer on official letterhead. This must include your name, date of birth, social security number and/or service number, enlistment date, the statement that you are still on active duty, and contain the phrase “No Time Lost” (if applicable) or list the time lost.
Step 2: Get Pre-Approved for a VA loan
It’s not uncommon to fall in love with something outside of your price range, which is why you should first talk to a loan officer to find out how much purchasing power you have. The pre-qualification process provides an idea of how much you might qualify for without actually completing an application or submitting documentation. But a pre-approval is a more comprehensive process of completing an application and providing the necessary documentation to be fully credit underwritten prior to having selected a home. Many sellers only accept offers from buyers who have been pre-approved.
Step 3: Sign the purchase agreement
During your home search, you’ll want to seek out a real estate agent who is familiar with the VA loan process. Once you find a home you’re interested in, this agent will be able to help you with the purchase agreement and negotiate seller-paid fees to make your overall out-of-pocket costs even lower!
Keep in mind, while a down-payment is not required for a VA loan, you will need cash available for an earnest money deposit . This is usually about 1-2% of the total purchase price and is a check made out to the seller after your offer is accepted. The deposit shows your “good faith” in following the agreements outlined within the contract. You’ll also need money to pay for an inspection if you choose to have one done. An inspection is not required for VA loans but recommended to properly assess the home’s condition. If any red flags come up during an inspection, you’re able to back out of the deal and get most (or all) of your earnest money back.
Step 4: Submit your documents
This is the point in the process where you’ll need to provide all the important documents. The following is needed from both yourself and any other co-borrowers:
- Paycheck stubs from last 30 days
- W-2s: last 2 years
- Copy of driver’s license
- Tax returns: last 2 years (all pages)
- Bank statements: last 2 months from savings & checking accounts
- An explanation for any late payments, collections, etc. as requested
- Copy of purchase agreement
And, if applicable, you’ll also need to provide a copy of these:
- Divorce decree (all pages)
- Bankruptcy discharge papers
- All pension statements, etc.
- Copy of social security annual “award” letter, statement, etc.
Other documentation may be required specific to your application; contact a NASB consultant for more information.
Don’t forget: Prior to being approved, you will be required to order an appraisal. The appraisal determines the home’s current market value and ensures the home meets the VA’s minimum property requirements.
Step 5: Seal the deal
Once you’ve been approved for the loan and the appraisal has been completed, the home is ready to be legally transferred over to its new owner: You! Prior to the day of closing, you’ll want to check a few more items off your to-do list:
Prepare your funds. You’ll need to provide a cashier’s check to the title company including any fees you still owe (this may include closing costs not agreed to be paid for by the seller, and the VA Funding Fee).
- Set up utilities. Your real estate agent will usually provide you with a list of the utility companies you’ll need to contact to have water, electricity, and gas set up in your name at your new residence, along with other optional services like internet, cable, and phone.
- Conduct the final walk-through. To make sure the house is in the condition as agreed upon in your contract, you will be able to walk through the house once more prior to closing. Any issues spotted after closing will be yours to fix. If you find anything in question during the walk-through, you may decide to postpone the closing and request that the seller fix a few of the problems, or even choose to walk away.
- Sign, sign, sign. At closing, you (and any co-borrowers) will sign several documents confirming that you understand the terms of the loan. You’ll also need to show proof of homeowner’s insurance. Then, say Hello to your first, very own home!
For more information on how you can secure a VA loan, contact a NASB VA-approved lending officer at 1-888-661-1982 or visit here.
