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The Home Buying Process For Veterans
VA Home Loans
The Home Buying Process For Veterans
When you are ready to buy a home, VA makes it easy! Watch the video below:
Factors to Consider When Buying a Home
Table of Contents
What is the VA Home Loan Benefit?
Why Use Your Benefit?
Home Ownership Costs
Steps to Use the Benefit
What is the VA Home Loan Benefit?
VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan against loss, enabling the lender to provide you with more favorable terms.
For additional information about the VA Home Loan Program, please visit:
Why Use Your Benefit?
When Harold was ready to buy a home, a VA loan made it easy. Watch the video.
The guarantee VA provides to lenders allows them to provide you with more favorable terms, including:
- No downpayment unless required by the lender or the purchase price is more than the reasonable value of the property
- No private mortgage insurance premium requirement
- VA rules limit the amount you can be charged for closing costs
- Closing costs may be paid by the seller
- The lender can't charge you a penalty fee if you pay the loan off early
- VA may be able to provide you some assistance if you run into difficulty making payments
You should also know that:
- You don't have to be a first-time home buyer
- You can reuse the benefit
- VA-backed loans are assumable, as long as the person assuming the loan qualifies
Additional Informative Links
Home Ownership Costs
Educate yourself on the true costs of home ownership. By planning ahead, you will know how much you can afford and avoid any surprises from unanticipated expenses. Watch the video.
The Consumer Financial Protection Bureau has resources on reviewing your spending patterns and home ownership expenses.
You may also complete the Monthly Payment Worksheet, or use this mortgage calculator to help you calculate what an affordable mortgage payment is for you.
This is also an opportunity to consider what factors are most important to you and your family in purchasing a home. These factors can include commuting distance to work, amenities nearby like shopping and entertainment, and the quality of local schools. The importance of these factors and others will assist you in choosing the right home.
Your Home Loan Toolkit from the Consumer Financial Protection Bureau
Steps to Use the Benefit
Eligibility - Determine if you are eligible for the VA Home Loan benefit based on service and discharge requirements.
Apply for a Certificate of Eligibility - A Certificate of Eligibility (COE) verifies to the lender that you are eligible for a VA-guaranteed loan. You can obtain your COE online through the eBenefits portal or your lender can request it on your behalf.
Compare and select a lender - Contact several lenders to determine the best loan you can afford and be pre-approved. The Consumer Financial Protection Bureau's Owning a Home guide has tools and resources to help you shop lenders, explore different loan types, and compare loan offers.
Please view this video for additional information on being pre-approved by a lender.
In using your VA Home Loan benefit, you may be charged a 1% flat charge by the lender (sometimes referred to as a loan origination fee), and whatever reasonable and customary amounts for any or all of the following:
- Appraisal and Compliance Inspections
- Recording Fees
- Credit Report
- Prepaid Items
- Hazard Insurance
- Flood Zone Determination
- Survey
- Title Examination and Title Insurance
- Special Mailing Fees for Refinancing Loans
- VA Funding Fee
- Mortgage Electronic Registration System (MERS) Fee
- Other Fees Authorized by VA
Often the fee names are similar, however, ask the lender about the purpose of a fee if you are unsure what it is for.
In many instances you can negotiate with the seller to pay part or all closing costs. To limit your closing expenses, ask your real estate agent to submit your offer with the seller paying your closing costs.
You may want to attend a home buyer education workshop or take part in pre-purchase counseling prior to buying a home. The Department of Housing and Urban Development sponsors housing agencies that offer these services at little or no cost to you. Please visit this link to find a housing agency in your area or call (800) 569-4287.
Shop for a Home – A real estate agent can help you navigate the home buying process. It is important to select a real estate agent that you are comfortable working with, and that will work diligently to help you find the right home.
Suggestions for selecting a real estate agent include:
- Searching online for experienced agents that come well recommended in your area.
- Speaking with friends and relatives who have recently purchased a home in your area. They can be a great source of information regarding their experience with a particular agent.
- Interviewing several agents to determine which one is the right fit.
Remember, selecting an agent may come with certain contractual obligations. Most states, as a matter of law, require agency disclosure. This is meant to inform potential buyers and sellers of the nature of their relationship with the real estate agent, and the rights and obligations associated with that relationship. Before signing any documents, discuss these items with the real estate agent and understand the different types of agency (some examples: buyer’s agent, seller’s agent, or dual agent), your responsibility (if any) with regards to commissions or payment for services, and any contractual obligations to the real estate agent should you choose to terminate the agency relationship.
Sign a Purchase Agreement – When you find the home that is right for you, your real estate agent can help you develop an offer, create the sales contract, and assist you with the negotiation process. Remember to include in your sales contract, a contingency which voids the contract if you are unable to obtain VA-guaranteed financing. An example of a VA Option Clause:
"It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs."
Other contingencies to consider are an appraised value contingency and a satisfactory home inspection contingency. Your real estate agent can advise you if these or other contingencies are typical in your real estate market.
Appraisal - Lenders require an appraisal to ensure there is sufficient collateral for a home loan. Once there is a ratified purchase agreement (one that is signed by both the buyer and seller), the lender will engage an appraiser to provide an opinion of value of the home, and ask for you to pay the appraisal fee at this time. To ensure impartiality, borrowers are not involved in selecting the appraiser.
If you are using the VA-guaranteed Home Loan benefit, a VA approved appraiser will complete the appraisal to determine the home’s value and ensure it is safe, sound, and sanitary for you and your family. For more information on VA's minimum property requirements, please watch this video.
The lender will review the appraisal when it is complete to ensure it meets their underwriting standards, and there is sufficient collateral to complete the home loan. You lender will provide you a copy of the appraisal.
If the appraised value is not sufficient enough to complete the loan, you have several options to enable you to continue with the purchase:
- Request a Reconsideration of Value (ROV). If you feel that the appraised value is less than it should be, ask your real estate agent to provide valid sales data to the lender to support your opinion. The lender will ask the appraiser to reconsider the appraised value based on the additional comparable sales data.
- Renegotiate the sale price. The seller may be willing to consider a reduced sale price that is equal to or lesser than the appraised value.
- Bring cash to the closing table. If the ROV does not yield a higher value and the seller is unwilling to negotiate a reduced sale price, the buyer may have the option to pay the difference in cash at closing.
An appraisal is not a home inspection. Buyers should always consider hiring a qualified home inspector to thoroughly inspect the home for defects and potential maintenance issues. More information on the difference between a VA appraisal and a home inspection can be found by viewing this short video.
Closing and Move In - The closing is the time when the home purchase is funded through your loan, and downpayment, if you have one. Remember, the VA-guaranteed home loan features no downpayment unless required by the lender or the purchase price is more than the reasonable value of the property.
With no downpayment, you can use those savings to further grow your emergency fund or use the money on household expenses.
Your lender is required by law to provide you a Closing Disclosure at least three business days before closing. More information on the closing disclosure is available here.
Closings may occur at a title company, escrow office, or attorney’s office depending on your area’s laws. Expect to sign many documents including the mortgage, the note, and the deed. During the closing expect your real estate agent to be present, an escrow officer or closing agent to conduct the transaction, and the seller or a representative may or may not be at closing with you. This can be a lengthy process but always stop to ask questions if you have any.
For more information on what to expect at closing, please visit this link.
Congratulations, once you are done with closing, you now own the home.
