Understanding the VA Loan Pre-approval Process from One of the Best Mortgage Lenders
As a military veteran, your hard work and sacrifice for this country do not go unnoticed. The Veterans Administration (VA) believes you deserve an opportunity to secure affordable financing for a home of your own. For more than 75 years, they have been advocating for this. Thanks to their efforts, the VA loan program was able to come to fruition.
VA loans are government-backed but can be issued by private mortgage lenders like Homestead Financial Mortgage. We are proud to work with you without a middleman and close your loan on time.
So, if you’re a veteran and ready to purchase a home, you can turn to us for guidance. From pre-approval to closing, we’re here for you every step of the way.
What You Should Know About VA Loans
Homestead Financial is proud to be recognized as an approved VA lender.
When you seek a VA mortgage through a private mortgage banker (like us), they’ll loan you the money for your purchase. But – the VA guarantees a portion of that loan. Compared to conventional and FHA loans, a VA loan has fewer down payment criteria to be met. And VA loan rates are typically better than conventional and FHA interest rates.
While a VA loan gives you options for using your home loan, it will only apply to a primary residence. You can:
- Purchase a new home or a fixer-upper and finance the repair costs
- Or refinance and repair your current home.
However, you cannot use it to purchase a secondary residence, such as a vacation home or investment property.
If you’re interested in purchasing a condo or a manufactured home, there are some restrictions and guidelines. Buying a condo is possible with a VA loan. But only if it is on the VA’s approved condo list.
And manufactured homes must meet minimum property standards, be on private land, and have a permanent foundation to qualify.
VA Mortgage Loan Pre-Approval Requirements
Much like a conventional mortgage’s pre-approval process, there are minimum qualifications VA lenders want you to meet. And your lender will seek out more information regarding your
- Home buying goals
But because this is a government-backed loan specific to veterans, there are certain unique requirements.
Obtain Certificate of Eligibility (COE) and DD 214
First, you will need a valid Certificate of Eligibility (COE). That is a unique VA loan requirement.
The COE serves as proof of eligibility from the VA and determines your entitlement. Luckily, Homestead Financial Mortgage can take care of this step for you.
You’ll also need your DD Form 214, also known simply as DD214. That is your certificate of release or discharge from active duty. You’ll receive this at the time of your discharge or retirement. If you don’t have your DD214, you can easily obtain an electronic copy from the VA eBenefits portal.
Note: If you are the surviving spouse of a veteran, you can also get these documents.
Credit Score Assessment
Although the government does not require any minimum scores, every lender has its requirements. Again, much like conventional loans, all borrowers on the loan must have acceptable FICO credit scores.
Generally speaking, a credit score of 620 or higher is recommended, and you cannot be in default for any other type of government loan.
Debt-to-Income Ratio (DTI) Assessment
As part of your debt-to-income ratio (DTI) assessment, you must provide proof of an acceptable means of income and a thorough overview of outstanding debts.
Conventional loans usually require the maximum DTI to fall between 36 and 45 percent. The maximum DTI you can have while qualifying for a VA loan is typically 41 percent. But much like credit score requirements, every mortgage lender is different.
Note: A DTI of 41 percent means that no more than 41 percent of your income goes toward paying off debts each month. That includes auto and student loans and other debts like credit cards and personal loans. Your Homestead loan officer can review your current DTI and offer guidance where needed.
VA Loan Funding Fees
To receive a VA loan, you must pay a funding fee based on the percentage of the total loan amount. These fees range from 1.4 to 3.6 percent and depend on the following:
- Whether or not you have a down payment
- If this is your first VA loan or not
- Your type of military service
With that being said, there are specific reasons your funding fees can be waived or refunded. For example, disabled veterans don’t need to worry about this fee.
If the fees do apply to you, know that the fees vary year by year, so always check with us for the current rate and eligibility for waived fees or refunds.
In addition, some states even reduce property taxes for disabled veterans.
VA-Specific Closing Costs
When purchasing a home with a VA loan, it’s wise to be prepared for closing costs. You can always negotiate with the seller to pay up to 4 percent of the closing costs (including your VA funding fee). These are called seller’s concessions.
It’s wise to work with your realtor to determine how much of the closing costs you’d like the seller to cover before making an offer. Check with your realtor in a hot seller’s market to see if asking for concessions could lose the deal.
Private Mortgage Insurance (PMI)
Last but not least – is private mortgage insurance (PMI).
Unlike other non-conventional or conventional loans with less than a 20 percent down payment, you don’t have to worry about paying PMI on your VA home loan.
Why Choose Homestead Financial for a VA Loan Near You
Homestead Financial is proud to serve as a direct VA loan lender. That allows us to get you to the closing line as quickly as possible, all while providing excellent service along the way. We’ve closed thousands of VA loans and would like to help you too.
Homestead Financial Mortgage’s low-interest home loans are some of the best in the states we serve. We’re licensed in Arkansas, Colorado, Florida, Illinois, Indiana, Kansas, Kentucky, Missouri, Montana, Ohio, Oklahoma, Tennessee, Texas, and Wisconsin. Contact us today