The homebuying process can be scary for any first-time buyer and it is no different for military families using the VA Home Loan. There is a lot to know, which is why we created our Free Education Program, Savvy Homebuyer, for you to get all the answers you need about buying your first home with the VA Loan.
Step 1: Gather the required documents
Collect the necessary documents to support your loan application. This typically includes:
- A government-issued ID, such as a driver’s license
- Past two years of W-2 statements
- Past two years of tax returns
- Most recent bank statements from checking, savings, and retirement accounts
- Most recent LESs and paystubs
- VA disability awards letter (if applicable)
- Social Security awards letter (if applicable)
- Divorce decree (if applicable)
- Bankruptcy discharge letter (if applicable)
- A DD-214, Statement of Service or Points Statement (depending on your service type)
Step 2: Find a VA-approved lender
VA has been vetted and approved to work with the VA Home Loan. They are well-versed in the VA loan process and can guide you through the application and preapproval steps. The VA website has a full list of VA-approved lenders.
Step 3: Determine eligibility
Once you have connected with a VA mortgage provider they can assist you in getting a copy of your Certificate of Eligibility. Your Certificate of Eligibility confirms that based on your service you are eligible for the VA Home Loan benefit.
Step 4: Complete a loan application
Submit a loan application to your chosen VA-approved lender. This can often be done online or in person. Provide all the necessary information and documents as requested by the lender.
Step 5: Credit and underwriting review
The lender will review your credit history, employment details, income, and other financial factors. They will also verify your COE and the home’s eligibility. This step helps determine if you meet the VA loan requirements.
VA Home loan minimum credit score
The VA doesn’t set a minimum credit score for VA loans at the program level. The VA Home Loan technically has no minimum credit score. Instead, the VA relies on lenders to ensure borrowers are a satisfactory credit risk. VA lenders typically require a FICO score of at least 620. High loan amounts, such as those exceeding $1 million, may require a higher credit score.
Step 6: Obtain a preapproval letter
If you meet the lender’s criteria, they will issue you a preapproval letter. This letter states the maximum loan amount you qualify for based on your financial situation and the VA’s guidelines. It demonstrates your readiness to proceed with a home purchase.
Step 7: Select a VA knowledgable real estate agent to represent you
Working with a realtor who is knowledgeable about VA loans is crucial when utilizing the VA home loan program. These realtors understand the intricacies of the VA loan process, including the unique terms, timelines, and benefits associated with VA financing. They can guide you through the specific steps, paperwork, and timelines involved, ensuring a smoother transaction.
Step 8: Choose a property that meets VA Lending Guidelines
VA Lending guidelines ensure that the home you are buying is in good condition. Some of these property guidelines include:
- Mechanical systems must be safe and have reasonable future utility
- The heating must be adequate
- Roofing must be adequate
- Crawl spaces and basements must be dry
- Property must be free of termites, dry rot, and fungus growth
- Lead-based paint must be remediated
Step 9: Write an Offer and Negotiate Terms of Purchase
When writing an offer on a home, several key elements are typically included. First and foremost, the offer will state the proposed purchase price for the property. It may also outline any contingencies, such as financing or home inspection, that need to be satisfied before the sale is closed. It is important to make sure your offer contract contingencies align with your loan requirements when using the VA Home Loan.
Additionally, the offer may specify the desired closing date and include any requested inclusions or exclusions, such as appliances or furniture. Lastly, the offer will include details about the earnest money deposit, which demonstrates the buyer\’s serious intent to purchase the property.
Overall, the offer serves as a formal document that outlines the buyer\’s terms and conditions for buying the home and acts as the starting point for negotiations with the seller. Once the agreement is met the contract is provided to your loan officer.
Step 10: Inspections, Contingencies and Appraisals
Inspections, contingencies, and appraisals play significant roles in the home buying process when using a VA loan. Inspections allow you to assess the condition of the property and identify any potential issues or repairs needed. The VA appraisal ensures that the property meets the VA’s minimum property requirements and determines its fair market value. Contingencies, such as financing and home inspection contingencies, provide protection for you and allows you to back out of the purchase or negotiate repairs if certain conditions are not met. These steps help ensure that the home is in satisfactory condition, meets the VA loan requirements, and provides a safeguard for the buyer’s investment.
Step 11: Close on your new home!
Closing on your first home with a VA home loan includes several key steps. During the closing process, you can expect to pay closing costs, which typically include fees for the appraisal, credit report, title insurance, and other associated expenses. You will be required to sign various loan documents, including the promissory note, mortgage agreement, and other legal disclosures. These documents outline the terms and conditions of the loan and your obligations as a borrower.
Once all the paperwork is completed and funds are disbursed, you will receive the keys to your new home, marking the exciting moment of officially becoming a homeowner. It is essential to review all documents carefully, ask questions, and ensure that you fully understand the terms of your loan before signing to ensure a smooth and successful closing process.
