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Navigating the VA Loan Process

House buying. Getty Images
House buying. Getty Images

Veterans Affairs (VA) stands ready to help servicemembers, veterans and eligible surviving spouses become homeowners. Private lenders provide VA mortgages and the VA guarantees a portion of the loan, allowing you to obtain more favorable terms. VA home loans are also available to refinance an existing mortgage.

Enjoy the benefits

Whether buying or refinancing, you can enjoy the following unique advantages of a VA loan:

  • No down payment required. You can get up to 100 percent financing so you can buy a home without first having to save enough for a down payment.
  • No private mortgage insurance required. With a conventional mortgage, you typically have to pay for private mortgage insurance unless you put 20 percent down, but VA loans are exempt.
  • One-time VA funding fee can be rolled into the loan and is reduced if you put at least 5 percent down. Veterans receiving VA disability compensation don't have to pay the VA funding fee. Proceeds of the funding fee are paid directly to the VA to help cover losses on the few VA mortgages that go into default.
  • Closing costs may be lower than with other mortgages. VA rules limit the amount you can be charged.
  • The mortgage is assumable. If you sell the home, a qualified buyer can assume your existing mortgage rather than obtain a brand new mortgage. If mortgage rates rise, this can make it easier to sell your home. The buyer does not have to be a veteran, but should be approved by the lender or the VA.
  • No prepayment penalty. You can pay off your mortgage early without a penalty fee.
  • VA assistance to veteran borrowers in default due to temporary financial difficulty. VA may be able to help you avoid foreclosure. Homeowners can often work out a plan to avoid foreclosure with their lender, whether they have a VA or conventional mortgage. However, if your lender is unable to help, the VA has loan specialists prepared to discuss potential ways to help save the loan.

Six steps to homeownership with a VA loan

  1. Choose a real estate professional. Asking friends or family for a referral is a good place to start. You can also drive around a neighborhood you're interested in and notice which real estate agents have the most homes listed. Be sure the person you select is familiar with the areas in which you're interested.
  2. Find a lender. Getting preapproved for a mortgage can help you narrow your home search to what's affordable for you. Mortgage calculators can help you:
    • Understand how buying a home can fit into your budget.
    • Decide how much you can spend on a home.
    • Estimate closing costs.
    • Click here for more information on calculating mortgages.
  3. Get a Certificate of Eligibility (COE) from the VA. The VA confirms your military service and verifies that you are eligible to receive a VA-guaranteed loan. Find out what evidence is need and start the process by applying online.
  4. Find a home and sign a purchase agreement. The sales and purchase agreement must contain a "VA Option Clause," which states that you're not obligated to complete the purchase if the purchase price exceeds the reasonable value of the property established by the VA.
  5. Apply for a VA loan. Work with your lender to gather the required documentation and complete a loan application. Your lender will order a VA appraisal.*
  6. Close the loan and move in! A closing company, attorney or representative from your lender will conduct the closing and coordinate the date and time that the home is to be transferred.
  7. *Note: VA's appraisal is not a home inspection or a guaranty of value. It's just an estimate of the market value on the date of the inspection. Although the appraiser does look for obviously needed repairs, VA doesn't guarantee the condition of the house. The appraiser, who is licensed, is not a VA employee.

This article is intended to provide general information and should not be considered tax or financial advice. Please consult a tax or financial advisor for specific guidance on tax laws and your individual financial situation.

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