10 VA Home Loan Tips You Need to Secure Your Dream Home
Buying a home can be both exciting and confusing. This is one of the biggest investments you will ever make, and the reality is that it doesn’t have to be a nightmare going through the VA Home Loan process. Both experienced and first-time military homebuyers who come into the process with some education and preparation in hand are setting themselves up for the best possible experience.
Here are 10 must-read VA loan tips to help you get the most out of your hard-earned benefits …
VA Loan Tip 1. Begin the process early without a Certificate of Eligibility.
You don’t need to have your VA Certificate of Eligibility to start the VA loan process. Because your COE can take up to 10 business days to process, a great tip is to go ahead and contact a VA Approved Lender like VALoanSpot.com to start the loan process and get things moving before waiting for your COE to come through.
VA Loan Tip 2. Aim to achieve pre-qualification.
The first step in any loan program is to fill out an application with the loan lender, so he or she can look at your financial scope and credit history and determine pre-qualification for your loan. There isn’t much sense in looking for a home before you have a clear and accurate idea of what you can afford and how much a lender is likely to extend. Not only does pre-qualification help you during your home search, but it also is a welcomed sight among home sellers and real estate agents.
VA Loan Tip 3. Get a home inspection.
A home inspection is for your own peace of mind while making one of the biggest investments of your life. The home inspection allows you to renegotiate items with the seller and helps ensure you don’t purchase a home that is falling apart. A home inspection isn’t mandatory, as VA Loans only require a termite inspection and an appraisal. However, you should think of a home inspection as mandatory in order to make the best purchasing decision.
VA Loan Tip 4. Be prepared.
A VA loan does require a lot of documentation on yourself, so in order to save time and money make sure you have everything ready. The best thing to remember is you need everything in TWOS: last TWO paycheck stubs, last TWO years’ tax returns, last TWO years’ W2s, last TWO months bank statements, and the last TWO statements of any other assets.
VA Loan Tip 5. Calculate a budget.
For your financial wellbeing, it’s vital that you determine your ability to afford the monthly VA loan payment. In addition to budgeting in your monthly payments, you must also be able to pay your existing consumer debt payments and afford a minimum standard of living (as determined by the VA).
VA Loan Tip 6. Stay clear of big purchases during the process.
Anything you add to your credit will be added to your debt-to-income ratio. If you purchase a big item that has a high monthly payment before your loan closes, this could set off some serious red flags and eliminate your approval. Lenders need to make sure your credit profile and assets remain steady while you’re waiting for the underwriting process to wind down and the issuance of a clear-to-close.
VA Loan Tip 7. “Borrowing more” is not possible.
A big question everyone always asks is if they can get cash out at purchase. The answer is no. You can refinance up to 100% six months after closing, however not at the purchase. If you want to finance in the closing cost, you must have the contract show that the sellers are paying for the closing cost. Otherwise, you will need that money down to cover the gap. The only exception is if you pursue and Energy Efficient Mortgage (EEM), which allows qualified borrowers to add up to $6,000 in energy-efficiency improvements.
VA Loan Tip 8. Evaluate your credit score.
The credit score plays an important role in your ability to receive a VA home loan, but not the only role. For example we go down to a 530 credit score on our lending, but if you have a score in that range, you must have clear credit history in the last 12 months.
Obtain a copy of your credit report, and examine it for errors, which can be anything from accounts that aren’t yours to reporting errors regarding late payments. Make sure you have been on time on your rent or current mortgage in the last 12 months before applying, and all judgments or liens are taken care of. If you are default on any federal debt, please get a payment plan set up or paid off before applying. Also, if you had a bankruptcy chapter 7 or foreclosure in the last 12 months, you probably will not qualify. Be prepared to provide a strong letter of explanation for ALL past credit issues if there are any.
VA Loan Tip 9. Establish Credit.
VA lenders like to see three open-trade lines that have been active and positive for the last 24 months. If your credit is lacking, please build credit by getting a secured credit card or something that you can pay on monthly that will show up on your credit report. Be prepared with items you have been paying on for 24 months that do not show on credit report.
VA Loan Tip 10. Pick the lender not just by the rate.
A common mistake is people call around and ask, “What is your rate?” and whoever spits out the lowest rate gets your business. The issue with this is that usually if it sounds too good to be true, it is. Many things can happen in this situation. There may be hidden costs on the associated rate. The lender could be just telling you this to get your business, and then hike your rate at closing. You could be starting your loan with someone who has a lack of knowledge when it comes to VA Loans, and although you will have the lowest rate, the process to get to closing will be a nightmare. Remember you get what you pay for. Good sites to follow rates are www.mortgagenewsdaily.com. Watch rates for yourself and remember the difference of .125% or .25% may only be a couple of bucks a month, so sometimes taking a little higher rate for good service will be worth it in the end.
After reading these top VA home loan tips, do you still have questions about the VA Home Loan Process, or are you ready to start the process?
Talk with a VALoanSpot Loan Specialist today at 800.537.2050, or fill out our Get A Quote form and a specialist will contact you shortly.