Introduction to the VA Mortgage Homebuying Process
VA Loans Process
Since the end of World War II, over 21 million veterans have bought homes with the aid of VA loans. The great majority of these veterans have bought soundly constructed homes and are now making regular payments on their mortgages as satisfied homeowners.
What VA Does for the Home Buying Veteran
VA guarantees part of your loan – which helps you to get a VA loan featuring:
- No down payment (unless required by the lender or the purchase price exceeds the reasonable value as determined by VA); and
- Competitive interest rate and the flexibility of negotiating interest rates with the lender;
- Assurance that you can pay off all or part of the loan in advance without penalty;
- VA appraises the house to determine its reasonable value in the housing market at the time the appraisal is made.
VA requires compliance inspections in most cases on proposed new construction to see that the house:
- Meets accepted standards of good construction.
- Conforms to the plans and specifications on which VA's appraisal is based.
VA will try to assist you in getting your builder to correct any defects about which you may have valid complaints.
What VA Does Not Do
VA does not have the legal authority to:
- Act as your architect. It does not supervise construction of the house you buy.
- Guarantee that the house is free of defects.
- Act as your attorney. It cannot provide you legal services if you run into trouble in buying or constructing your home.
VA cannot compel a builder to remedy defects in construction or otherwise compel the builder to live up to a contract with you. VA cannot guarantee that you will be completely satisfied with the house, or that you can resell it at the price you paid.
VA cannot guarantee that you are making a good investment. That is a decision which only you can make.
Do Not Be Misled
VA does not guarantee the CONDITION of the house which you are buying, whether it is new or previously occupied. VA guarantees only the LOAN. You may talk to many people when you are in the process of buying a house.
Particularly with a previously occupied house, you may pick up the impression along the way that you need not be overly concerned about any needed repairs or hidden defects since VA will be sure to find them and require them to be repaired. This is NOT TRUE! In every case, ultimately, it is your responsibility to be an informed buyer and to assure yourself that what you are buying is satisfactory to you in all respects. Remember, VA guarantees only the loan - NOT the condition of the house.
If you have any doubts about the condition of the house which you are buying, it is in your best interest to seek expert advice before you legally commit yourself in a purchase agreement. Particularly with a previously occupied house, most sellers and their real estate agents are willing to permit you, at your expense, to arrange for an inspection by a qualified residential inspection service. Also, most sellers and agents are willing to negotiate with you concerning what repairs are to be included in the purchase agreement. Steps of this kind can prevent many later problems, disagreements, and major disappointments.
The application process for VA financing is no different from any other type of loan. In fact, the VA application form is the same as that used for HUD/FHA and conventional loans. The mortgage lender verifies the applicant's income and assets, and obtains a credit report to see that other obligations are being paid on time. If all is well and the appraised value of the property is enough to cover the loan needed, the lender, in most instances, can then close the loan under VA's automatic procedure.
To obtain a VA loan, the law requires that:
- The applicant must be an eligible veteran who has available entitlement.
- The loan must be for an eligible purpose.
- The veteran must occupy or intend to occupy the property as a home within a reasonable period of time after closing the loan.
- The veteran must be a satisfactory credit risk.
- The income of the veteran and spouse, if any, must be shown to be stable and sufficient to meet the mortgage payments, cover the costs of owning a home, take care of other obligations and expenses, and have enough left over for family support.
- An experienced mortgage lender will be able to discuss specific income and other qualifying requirements.
Being eligible for a VA loan is not the same thing as being able to get a VA loan. Both the VA and lenders have requirements you’ll need to hit in order to obtain home financing. Talk with a lender in more detail or move on to the next section in the VA Homebuying Process: VA Loan Prequalification