VAHLC is conducting a study of interest savings when using a VA loan as opposed to a conventional. Preliminary study results indicate veterans and active duty generally get better interest rates than those who use conventional loans when purchasing a home as a first time buyer. The anticipated savings a military first time home buyer home buyer would realize is about $26,450 on a $100,000 purchase.
The savings comes form a combination of mandated closing costs paid for by the seller, restricted fees paid for by the buyer, and the lack of a need for a down payment.
Veterans who have served for at least two years in the United States Army, Navy, Air Force, Marine Corps or Coast Guard may be eligible for no money down home loans.
Prior to writing a purchase agreement that stipulates VA financing, buyers should make sure that they are eligible for the VA loans benefit. To be eligible for VA home loan financing, a veteran or active duty military buyer must have served at least 90 continuous days in wartime or 181 days in peace time. Veterans, reservists, and active duty who meet this requirement can apply. Veterans who received a dishonorable discharge are not eligible for this program.
Before filling out a VA home loan application, veterans should make sure their credit is in order, as the VA requires good credit to be approved for a $0 down first time home buyer loan. If a buyer has poor credit 500-620 FICO score, or if they are not eligible for the VA benefit, they may have to use an FHA loan. If this is the case, they may have to offer a down payment to secure the property. However, once the buyer receives a loan, making on time mortgage payments will help substantially raise their credit score. If a veteran has any concerns about credit, they should consult VA Home Loan Centers to explore thier options for mortgage credit counseling and if necessary, credit repair prior to seeking loan approval.
The VA home loan application process is no more complicated than that of any other home loan. The buyer will need their DD214 or Statement of Service (active duty) to prove that they meet the service requirements.
In addition to this, they will need W2s, 1099s, or schedule C’s or other tax documents demonstrating steady income and stable employment history.
Borrowers generally have to submit their last two tax returns, although self-employed veterans must submit their last three schedule C returns.
Once the veteran submits the VA loan application to VA Home Loan Centers, the Veterans Administration in conjunction with underwriters evaluate the applicant’s credit-worthiness and income level as well as appraising the proposed home’s value.
There is no standard time frame for completion of loan processing but usually will take approximatley 30 days.
The more information the applicant provides on his/her VA home loan application, the more likely it is that the VA will process their application reasonably quickly.
Once VA Home Loan Centers processes the application, it forwards it to the loan insurer for underwriting. The insurer may request additional information from the borrower before approving the loan; however, if no additional information is needed, the loan may be approved in as little as two days. The investor then requests and prints the veteran’s loan documents and sends them to him/her to sign and return. From there, another three to four days may pass (depending on loan type and applicable law) .
Interested persons can apply for VA loans by telephone, regular mail, fax or online.
Philip D. Georgiades is a staff writer for VA Home Loan Centers and an expert in VA loan transactions.