The Department of Veterans Affairs offers a loan for veterans in the USA who can borrow money to purchase a property. For first-time home buyers, this federal loan helps future owners save money over the entire loan duration, including saving money on hefty payments like down payments or refinancing.
Understanding the eligibility requirements, how to obtain preapproval, and how to apply for the VA loan gives future home buyers the chance to obtain the necessary documentation for every step in the process.
VA Home Loan Prequalification Criteria
The main eligibility criteria for applying for a VA loan is meeting the VA Certificate of Eligibility or COE stipulations. This certificate ensures all applicants meet the minimum service requirements through the US Department of Veterans Affairs:
- 181 days during peacetime in active duty,
- 90 days during wartime in active duty,
- Six years in the Reserves or National Guard, or
- survived a spouse who lost their life in the line of duty.
Process to Prequalify for a VA Home Loan
After gathering the necessary papers for the COE, the next step in applying for the loan is to ensure that your finances are in order. Getting preapproved by lenders to give you funding makes you more desirable to property sellers and real estate agents.
During the preapproval process, lenders will examine your current income level, history of income, debt (ex, student loans or mortgages), and other indications that you may or may not be able to repay the loan for the property.
There are a few critical aspects of your finances and history that lenders will examine during the preapproval process:
- Credit check
- Statement of service
- Employment verification
- Assets verification
- Identity verification
Steps of How to Obtain Preapproval
Once you have been preapproved for the VA loan, it is time to proceed to the final step—obtaining initial approval for your VA property loan to purchase your house. Although it can be time-consuming, this step-by-step process details all the paperwork and “to-dos” you must tick off before you can afford your dream home.
Analyze Your Financial State
Going through your finances isn’t easy—sometimes, you can find debts, unpaid bills, and income red flags that could stand out as warning signs to lenders. Analyzing your finances can help you identify any areas that might need to be taken care of before you begin obtaining a VA loan. Since purchasing your first home is a big deal, you must ensure that you meet the financial requirements and have a positive financial standing before applying.
Pull your credit report beforehand to see what is hampering your credit score. Fix any issues that could negatively affect your score, like unpaid bills, debts, or a high credit balance. Try to pay off any credit cards and get rid of other outstanding loans before moving on. This can significantly increase your chances of obtaining a VA loan for your house.
Acquire the COE
The next step in getting approval for your VA loan is to acquire your Certificate of Eligibility before you start the process. Contact someone from your specific government unit or branch of the military if you need the official paperwork or a copy of your discharge document and COE.
Organize Your Documents
Now that you have your finances in order and your COE ready to go, it is time to organize the paperwork so you can have everything in one place. For employment verification, including pay stubs, W-2s, self-employment verification, 1099s, or current savings and retirement income. Next, provide proof of employment, like workplace pay stubs or employer contracts, that show the duration of your current job.
In addition, providing bank statements, including savings, checkings, IRA, Roth IRA, and other investment accounts, can help prove your financial state and current source of consistent income. Lastly, add proof of identification by including your Social Security card, passport, or driver’s license.
Apply for the VA Home Loan
The fourth step in applying for the loan is—well, applying. Once you have your documents and any unwanted debts are taken care of, the next step is to apply for initial approval to see if you qualify for this type of loan for your first house. A representative might contact you throughout the evaluation stage if they need more information or documentation to accompany your request.
Receive the Approval Letter
The last step in applying for a VA loan is to wait for the approval letter to see if you have been accepted. Generally, it takes less than 3-5 days to get accepted for a VA loan. The preapproval letter lasts 60-90 days from the date it originated. The short approval time is because a person’s financial situation can change a lot within 2-3 months.
Benefits of VA Loans
There are a few perks to choosing a VA loan over any other type of financing option for your first house. If you qualify for this kind of borrowing, you can put down money for a property easier and quicker than you would otherwise.
- Housing grants — The VA Loan applies to those with service-related disabilities who buy or add to an adaptable home that is ADA-accessible for their needs.
- Foreclosure avoidance — Veterans Affairs helps with financial counseling and educational courses to help veterans avoid issues during financial struggles.
- No down payment — Veterans can purchase a house without making a down payment. For example, a veteran can save upwards of $90,000 on a 20% down payment on a $450,000 loan.
- No private mortgage — Private mortgage insurance protects those who lend money to a borrower in case the borrower, in this case, the veteran, cannot repay the loan. However, for VA loans, there is no monthly mortgage insurance. Those who have a VA loan can save hundreds per month.
- Low interest rates — Furthermore, VA loans offer very low interest rates that are fixed in the current market, meaning they won’t fluctuate with the current financial economy.
- Low credit requirements — Lastly, if you have a bad credit score or poor rating, don’t worry. VA loans have much lower credit score regulations than typical mortgages.
Prequalify for a VA Home Loan With Our Assistance
Instead of doing everything by yourself, Home Helpers’ knowledgeable experts help. Our team can give you the information you need to obtain VA home loan prequalification. We help you gather the necessary documents, follow the correct steps, and obtain your preapproval so you can pay for your first home. Contact us today to get started with the house-hunting process in Louisiana!