A VA Home Loan (VAHL) is a home loan guaranteed by the US Department of Veterans Affairs, also known as VA. The VAHL program began in 1944 through the original Military Readjustment Act, or the GI Bill of Rights. The GI Bill provided veterans with a federally guaranteed home loan with no down payment, making the dream of homeownership a reality for millions of veterans and their dependents.
VAHLs are made by private lenders, such as banks, credit unions, and mortgage companies. Contrary to popular belief, there is little bureaucracy associated with obtaining a VA loan. In fact, the application process for a VAHL is not much different from the application process for any other type of mortgage. If you are a veteran who is interested in buying a home, here are the steps you need to take to obtain a VAHL.
Request a Certificate of Eligibility
Obtain your Certificate of Eligibility (COE) by completing VA Form 26-1880 (Application for Certificate of Eligibility for VAHL Benefits) and submitting it to the VA Eligibility Center along with proof of military service. If you’ve already started the loan application process, you could even ask your lender to help you get the COE. Check the status of your application for a COE in 10 days.
Find a Lender
Look for lenders who participate in the VAHL program. Find a good lender because interest rates, closing costs, and discount points vary greatly from one lender to another. Get pre-approved for a loan so that you can determine the loan amount you will get. The lender will review your credit history and income information to determine if you qualify for a home loan. Consider searching for VA Lender Appraisal Processing Program (LAPP) lenders because they can process VA loans faster than other lenders.
Find a house you want to buy
Browse houses and decide which house you want to buy. You can use the services of a state-licensed real estate agent to tour different homes and find a home that meets your needs. Make sure your purchase and sale contract includes a “VA Option Clause,” which is also known as a financial contingency. This clause makes the contract subject to approval for a VA guaranteed loan.
Request an appraisal
Typically, your lender will request an appraisal from the VA. Your lender will send a VA form to a state-licensed real estate appraiser, who will visit the home to determine the market value of the property. Please note that the VA appraisal is not a home inspection or a guarantee of value; the VA does not guarantee the condition of the home. Also, lenders cannot request specific appraisers and appraisers are not VA employees. The lender will review the appraisal and the borrower’s credit, income, and assets to decide whether or not to make the loan.
Close the sale and move into your new home
If the loan is approved, you must contact a state licensed insurance agent. Typically, the home title is examined and insured by a title insurance company that can also prepare closing documents and enter them into public records. Once everything is settled, you can move into your new home!