Outlining the Steps of VA Loan Approval

Many borrowers think they will be processed for VA loan approval directly with the the Department of Veterans' Affairs (the VA). In fact, similarly to both the Small Business Administration and the Federal Housing Administration, the VA does not provide direct financing. What it does provide is a loan guaranty service. This means the VA will insure your loan with a private lender, essentially guaranteeing the loan can never go into default. There are many advantages to this guaranty if you qualify through the simple process.

Certificate of Eligibility

The first step for most veterans will be to get a certificate of eligibility on the loan from the VA. You can wait to do this step later, but you run the risk of delays in processing, which means you could lose your loan or even lose the house you have placed an offer on. It is best to start with this step before you even seek a loan. The entire process can occur online through simple prompt screens. You will need only your personal information, including your discharge papers or your active service records, in order to gain your certificate. Once the certificate is processed, you will know the size of your guaranty and can print the certificate on your home computer.

Application for Private Loan

The next step is to find a private lender willing to fund your loan. It is preferable to work with lenders who have familiarity with VA home loans. In fact, it is best to work with a VA-approved lender. The lender will streamline the process for you, making it much faster and easier. All you have to do is apply as if you are seeking a standard loan, providing your income and credit information, and wait for the lender's response regarding your financing.

Submission of Loan Guarantee

The next thing you have to do is actually redeem your loan guaranty. When you work with a VA-qualified lender, the lender does this for you. This automates and expedites the process. Otherwise, you will have to submit a second set of forms to the VA showing your certificate of eligibility and the loan you actually qualified for with a private lender. If you are making an offer on a home in the meantime, make the offer contingent upon your receiving the guarantee. Otherwise, you could be on the hook for the loan contract despite failing to receive your VA home loan.

Benefits of a VA Home Loan

The goal of the VA home loan program is to place as many veterans and service people in their own homes as possible by making them low-risk borrowers instead of high-risk borrowers.The VA home loan program is aimed to greatly reduce the cost of financing a home for a veteran or active duty individual. Since military personnel tend to have low asset bases and low credit scores due to a host of factors, this program is designed to help them get around obstacles to home ownership. You will be more likely to find approval for a private loan if you have the VA guaranty. 

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