Steps in the VA Home Loan Application Process:

There are five basic steps to the VA Loan Process when obtaining a VA home loan.  Although there are lots of details within each step and some may overlap, here is a basic overview of how the VA loan process works.

1. The veteran home buyer should contact a VA lender to apply for the VA loan.  At this point, if the veteran has not already obtained his/her certificate of eligibility, they will need to.  The lender may be able to obtain it off the internet or the veteran may have to complete a form and send it to the appropriate eligibility center.  In either case the lender will be able to assist in the procedures of how to obtain a certificate of eligibility.  The lender will complete a loan application and gather supporting documentation, i.e., paystubs and bank statements.  An important item for veterans to know is that lenders set their own interest rates, discount points and closing points.

    

2. The veteran selects a home they are interested in.  This could be a VA foreclosure, new construction or a home with the help of a Realtor.  The purchase and sales agreement should contain a VA option clause.  Sample wording for 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 of 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."
   

    

   The contract must also allow the veteran to "escape" from the contract without penalty if he/she is unable to obtain a VA loan.  Ideally veteran home purchasers will contact a lender to get "pre-qualified" (see how much they can afford) prior to searching for a va home.  Please review our site for information on certificates of eligibility and a listing of lenders.

    

3. The VA Lender will "process" (develop) all credit and income information.  Lenders are allowed to use VA approved automated underwriting systems.  The lender will also order a VA appraisal.  VA's appraisal is not a home inspection or a guaranty of value.  It is an estimate of the market value as of the date the inspection is made comparing it to similar homes that have recently sold in that area.  Although the appraiser does look for obviously needed repairs, VA does request that appraisers not address cosmetic items.  VA does not warrant the condition of existing homes.  The appraiser is a licensed individual who does not work for VA but is chosen by VA to assure his/her review is unbiased in any way.  The lender can not request which appraiser to use, they are assigned on a rotation basis.

    

4. Upon receipt of the appraisal and all supporting documentation on credit, income and assets, the lender will "underwrite" the loan.  It is the lender who reviews all the data collected and decides if the loan should be granted, developed for additional data or if the veteran does not qualify and must be denied.  Although VA does "underwrite" some loans, it is very rare.  The decision on whether or not to approve the loan is generally made by the VA lender.

    

5. The final step for loans that meet VA regulations and guidelines is the loan "closing" (when the transfer actually takes place).  The VA lender chooses the title company, attorney or if their representative will conduct the closing.  The title company, attorney or lender representative who will handle the closing will coordinate the date and time.