The process of securing a VA Loan is fairly straight forward, albeit it will take quite a while to finally procure a VA loan. Remember since VA loans are government loans, the underwriting process can possibly take a long time.
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Securing a COE
As Part 3 of our series on VA loans pointed out, it is essential to obtain a Certificate of Eligibility in order to truly secure a VA loan. Making sure that all the necessary materials are in place to prove eligibility will help to expedite the process. While, this step does not need to be done first, in fact your lender can help you get it, obtaining a COE first should help to take away some of the uncertainty in the loan process. The VA can take anywhere from 4 to 6 weeks before sending the COE, so plan accordingly.
Choosing a Lender
Choosing a lender can be one of the toughest things in to do in the entire process. This is for the simple reason that it may be hard to find the right lender to process the VA loan. Hiring a realtor who is experienced in working with VA loans will help. When narrowing down lenders, make sure to ask two questions:
- Do you supply VA loans?
- Are you Lender Appraisal Processing (LAPP) approved?
The answer to both of questions should be yes in order to help make the loan process as smooth as possible. A lender being LAPP means that they are able to process the VA loan request on site. Some lenders do not have this ability and have to send out VA loan requests to affiliates that are LAPP approved. This adds more time to the overall process which may further hinder the home-buying process.
Once a lender is found that has experience in working with VA loans and is LAPP approved, work on getting pre-approved with them. Pre-Approval helps to show a lender the size of the mortgage that may be available and can be affordable to you. Remember that all lenders have different rates and terms, so shop around for the best terms for your situation.
Sign a Purchase Agreement
You found a house, now it is time to submit a purchase agreement. Use a realtor to help to negotiate a purchase agreement for the house. It is imperative to have a clause in the agreement in the case you cannot secure a VA loan. From the VA’s own Buying Process page, 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.”
Essentially, a statement like this will allow for you to get out of a loan if you are not able to secure a VA loan. This is just some added security, in the event that the VA loan is not processed. Therefore, it is vital to make sure that there is one in the loan agreement.
Applying and Loan Processing
A purchase agreement has been set, now it’s time to work with the lender to secure the VA loan. Being pre-approved and having chosen a lender that is experienced in VA loans will help to make the process easier. However, once the application is finished and sent off, it’s once again all in the hands of the lender and the VA. Given the workloads and staff of both respective institutions, it may take longer than the typical 4 to 6 weeks of other loans. The VA and lender will send an appraiser to look over the home being purchased. Once the appraisal is finished, the lender will review all the credit, income, assets, and the appraisal before deciding whether or not to grant the loan.
If the lending institution has approved the loan, they will choose someone to conduct the closing. This may be one of their representatives, a lawyer, or a title company. This intermediary will help facilitate the time and date of the official transfer of the home. Once that is completed, it’s all over and you’ve found yourself with a new home funded by a VA loan.
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