Using a VA Loan to Buy a Home
What to Expect
The process of buying a home financed by a VA loan is very similar to other types of loans. That may be news to some people, maybe even you. The more you know ahead of time, the better prepared you’ll be to get the home you want.
You’ll need to show sellers and real estate agents you’re serious about buying a house. The first thing you should do is get an approval letter from a mortgage lender. It may also be called a prequalification or preapproval letter. Either way, it shows you can get a loan, and will help you know what price range is right for your budget.
For a VA loan, you can’t go to any lender. You need a VA-approved lender. When choosing one, it’s a good idea to do these things:
- Ask about their experience with VA loans.
- Check their customer service and satisfaction ratings.
- Compare interest rates.
- Ask whether they keep your loan after closing or sell it to someone else.
Once you find a lender, you’ll fill out a mortgage application, and the lender will review your assets, income and credit. Then they’ll approve you for a loan amount.
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Working With a Real Estate Agent
A real estate agent can make a big difference in the home buying process. You can expect an agent to do these things to help make it easier:
- Find the right house in the right location.
- Act as a consultant for the home-buying process.
- Manage paperwork.
- Negotiate with sellers.
It’s important to tell your agent up front that you want to use a VA loan to buy your home. It’s a benefit you earned through your service, and they should be supportive of that.
After You Find a House
You made an offer and the seller accepted. After the celebration, two important things happen that get you ready for closing:
- A VA-approved appraiser will assess the value of the property and see if it meets the VA’s minimum property requirements.
The appraisal protects you and your lender from paying more for a home than it’s worth. Minimum property requirements help make sure you’re buying a home that’s safe, sound and sanitary. Learn more about minimum property requirements.
- Your mortgage company will work on underwriting your loan.
Underwriting is the process of verifying your income, assets, debt and property details. During this time, you should avoid making any major purchases or taking on new credit or debt that could affect getting final approval on your loan.
At closing you’ll sign all the final paperwork and officially get your mortgage. You’ll also pay closing costs. Everyone’s mortgage is unique so the amount can vary. These are some common costs paid at closing:
- Escrow funds: Your lender will collect these funds at closing to ensure there's enough money in your account to pay tax and insurance bills as they come due.
- Third-party fees: This covers costs from third parties your lender uses to process your loan. These fees typically include appraisal fees, title insurance costs and credit report fees.
- Per diem interest: You'll pay daily interest upfront to cover the period between closing and the date your first mortgage payment is due.
- Homeowners association (HOA) dues: If you're moving somewhere that has HOA dues, you may be required to pay a year's worth of dues at closing.
- Discount points: A point (or discount point) is a fee paid to lower your interest rate. If you've chosen to pay points, you'll pay for them at closing.
- Lender’s origination fee: This covers the lender’s cost of processing and underwriting your loan. It’s capped at 1% of the loan amount by the VA.