Becoming a homeowner is not complicated; however, it is a process. While some specific steps are pertinent to VA loan benefits, the overall process is very similar for every homebuyer. Fortunately, it is not complicated. 130,691 veterans purchase a VA loan in the first quarter of 2019. If all those fellow military members managed it, so can you. Here are 12 steps to help buy a home with a VA loan.
1. Work out your budget! What can you afford?
Big purchases require a close look at your household budget. There are many good templates out there; just Google it to find one that suits your needs. It helps immensely to know where your money is going monthly. This informs you of buying potential (aka the house you can afford) and the monthly mortgage payment you can handle. Depending on what you discover, you may choose to streamline your expenses, so you can save and afford a nicer home.
On the other hand, you may decide to purchase a more affordable one and maintain your lifestyle. Remember that homeowners have extra expenses, including property taxes, homeowner’s insurance, and home repairs. Creating a budget is not a requirement to qualify for a home loan, but it makes you a more informed consumer.
2. Get preapproved
Getting preapproved gives you the “serious buyer” status in the eyes of sellers and real estate agents. It means you have talked to a mortgage lender, and they have run your finances. The process includes determining your VA home loan eligibility, checking credit, confirming income, and establishing maximum mortgage affordability. Once completed, the lender will send a letter confirming your maximum loan amount. This means everyone can get serious and you can start negotiating the price, especially when up against other potential buyers who are not approved. Do not get confused between preapproval and prequalification. Prequalification means the lender asked you a few questions and relied on your answers with zero verification) to estimate how much you can borrow. Preapprovals are much less credible.
3. Shop for lenders
All VA loans are not the same. But all lenders are different, offering better great deals than others. So you do have to shop for the best lenders to get the very best deal available to you. In addition, lenders provide detailed loan estimates to explain everything about the offered mortgage loan. The Consumer Financial Protection Bureau has an exceptionally helpful guide about how to read these and compare them.
4. Find a reputable real estate agent
Usually, a buyer will retain a real estate agent, which will cost nothing. This is due to sellers generally paying the buyer’s real estate agent’s commissions. Not every buyer uses an agent, but it’s usually a good idea to ensure they get everything they are entitled to. Your real estate agent can be the greatest asset throughout the entire process.
A good real estate agent will help you with all the following:
·Finding your perfect dream home
·Negotiating the best possible purchase price
·Completing the proper paperwork
·An expert at guiding you through each step of the process
·Troubleshooting any issues
5. Find your home
Usually, the fun part depending on the location of the real estate market. This part may take the longest. Think ahead about your realistic future requirements as well as your present ones.
Do not be tempted by quick-fix purchases, with the assumption that you will move again in a few years. Buying and selling a home is expensive! The unpredictable real estate market Is not something to toy with. You usually want to build equity in your property before you make your next move.
6. Make an offer
Get a good real estate agent! They will prove to be most valuable through the whole process. So, listen to their advice. Your real estate agent’s job is to get you the best deal, having the knowledge and expertise to achieve the best outcome. So, leave all the negotiations to them. Instead, your real estate agent should talk through specifics with you. They should pitch an offer that will not alienate the owner but will be as profitable to you. You will be advised of any “contingencies” that are attached to the sale of the home. These items will negate certain eventualities, like a home inspection issue or a finance loan issue.
7. Pay earnest money
You will typically be expected to pay earnest money when your offer is accepted. Your agent can negotiate this amount; however, it is typically between 1 to 5 percent of the purchase price. Earnest money indicates to the seller that you are a serious buyer. This money will be applied to the closing costs, or if your closing costs are covered by a third party, you will be refunded the amount.
8. Get a home inspection
Home inspections are not required to purchase a home, but they are highly recommended. A home inspection provides you with a top-down evaluation of the home and property. This should not be confused with a VA home appraisal. The VA home appraisal is mandatory for a VA home loan and is arranged by your VA lender. It evaluates the property according to VA’s minimum property requirements (MPRs) and is intended to protect the buyer from purchasing a property that is not safe, sound, and sanitary.
Read more: VA Appraisal & Home Inspection Checklist
9. Update your lender documentation
Every document used in the approval process must be recent and accurate. Your lender will provide a list of documents it requires, but it helps by having everything already in advance to avoid delays. Gather copies of your documents, including your latest pay stubs and bank statements. You will also need to send the lender a copy of the latest signed purchase contract. This allows them to order the VA appraisal and update your loan application with your new address. You will then be asked to sign new mortgage disclosure documents. These are sent to you to lay out the terms of your loan in detail.
Read more: VA Mortgage Loan Document Checklist
10. Meet the conditions of your underwriter
Once your lender has all the required documentation, they submit your application to their underwriting department. Underwriting is the final step to approve your mortgage loan officially. It is not uncommon for underwriters to request additional information at this stage in the process. Once the underwriter gives final loan approval, the lender will send the final loan documentation to an escrow company.
11. Sign the final paperwork
You will likely go to the escrow agent’s office to sign all the final paperwork. Ensure that all the documents are carefully reviewed. Compare your loan estimate with the closing disclosure. If discrepancies are discovered between your closing disclosure and your loan estimate, your lender must justify them. Call your lender immediately if something does not look right for an explanation. If any closing costs need to be paid, you will pay any of those at this time. Ensure you bring certified funds to the escrow office. They will provide the total amount required.
12. Monitor the status of your loan
Your loan is still not complete when you sign the documents. Your lender could still take up to more than a week to finalize your loan and transfer the money to all parties. The final step entails recording the transaction with the county’s official records. Then many lenders make it a practice of carrying out a second, and possibly third, credit check before completing the closing process. If your credit score changes drastically, your lender could increase your mortgage rate or even cancel your loan. That translates to paying your bills on time, not opening any new accounts, and keeping your credit card balances low. So, tread lightly on your credit until complete.
Buy a Home Now!
If you are just getting started in buying a home, consider a VA home loan. VA loans typically come with much lower interest rates than most other mortgages. Many studies have shown consistently lower interest rates than FHA and conventional loans. In addition, the benefits of a VA home loan include zero money down required and no private mortgage insurance.