Simplifying VA Loan Approval – The Four Points To Remember

The process of getting approved for a VA loan can seem daunting to some, and there are copious amounts of information available on VA loan approval. While the great majority of information is intended to help potential borrowers understand the VA loan approval process, it can get quite confusing hearing so many different people explain the process and requirements in different ways, especially when they leave certain things out or emphasize other aspects. In an effort to help you understand what will be expected of you in order to be approved for a VA loan, here is a list of the four basic points to make sure you’re solid on. These four points can be found in the VA lender’s handbook and constitute the guidelines lenders are encouraged to follow when considering a loan application, so you’re getting inside information here.


The first point is VA entitlement. For a borrower to get approved for a VA loan, the first hurdle to jump is making sure that you are eligible for the VA loan program. If you’re not eligible in the first place, you can bet that you won’t be approved for a VA loan. To be eligible you must have satisfied the service requirements and have enough of your entitlement available to cover the home you are trying to purchase. The word ‘entitlement’ refers to the dollar amount that the VA will guarantee on behalf of the lender at any given time. Generally, full entitlement is $417,000, but it can be more in higher-cost areas in the country. Entitlement and eligibility can be reused. To make sure you are eligible for the VA loan program, you will need to apply for a Certificate of Eligibility (COE). Instructions can be found online, or you can work with a lender to have them assist you in submitting the application. Most lenders are more than happy to assist with this.

The second point is Property Eligibility. Just like a borrower has to be eligible for the VA loan program
, a property does as well. The VA will only guarantee homes that can serve as the borrower’s residence and meet all of the needs of the veteran and his or her family. These include single-family homes, condo projects that are on the VA-approved list, townhouses and multi-family homes up to four units. Manufactured homes can also be guaranteed if they are fixed to a permanent foundation, but it may be harder to find a lender willing to approve a loan for modular homes. There are other types of properties that may or may not be approved depending on the circumstance, but suffice it to say it must be a suitable residence, and will also be subject to the VA appraisal, which will determine the fair value of the home as well as its suitability for the veteran purchasing the home.

The third point is closely related to property eligibility, and that is Owner Occupancy. The VA has a very strict residency requirement, which mandates that the borrower must certify that they intend to occupy the property being purchased as their primary residence. This, of course, only applies to homes being purchased with a veteran’s VA loan benefits. Typically, a VA borrower must occupy the home within 60 days of purchase, though active service members currently deployed can receive an extension of up to 12 months to occupy the home. Previously, only the spouse of the VA-eligible borrower could satisfy the occupancy requirement in the stead of the the borrower, but new changes make it possible for dependent children to satisfy it in some cases. Regardless, primary occupancy must be established in some way.

The last point is the one that most borrowers focus on: Income and Credit. In order to be approved for a VA loan, the borrower and any co-signers need to have sufficient income and credit. This approval varies from lender to lender and is much like the conventional loan approval process. The VA does not set a minimum credit score, but does have a maximum debt-to-income ratio that borrowers cannot exceed. This maximum is 41% and enough residual income to cover living expenses typical of the area in which they live. Credit score requirements are left to the individual lender, as are the requirements for income and employment verification, to a degree.

Tips from a VA Mortgage Expert

Statistics show that only 25% of all eligible VA home buyers actually utilize their hard-earned veteran loan benefits. I have dedicated my entire professional career to assisting veterans use and understand these VA benefits as they pertain to buying or refinancing a home mortgage. Life is full of difficulties and even things we may feel are unfair, and if I can play a role in making something less difficult for our Nation’s veterans then I will do all I can to assist!

I have put a lot of thought and effort into this article and hope that all those that come across it feel that it has made the VA home loan process much easier to navigate from start to finish because truthfully, the VA home loan is a very simple and straightforward tool that can make home ownership a reality for hundreds of thousands of eligible veterans and active military.

Step 1 is getting your preapproval letter.

Getting a preapproval letter from your VA lender is one of the first steps that all veteran homeowners should take when trying to purchase a home. Before you go out and try to start buying a home you need to get a preapproval letter from your VA loan officer. The reason it is so important to have a preapproval letter in your possession is because sellers and real estate agents will not take you seriously until you have the preapproval letter. Once you have your preapproval letter you can start making offers on different homes. Have you ever seen the movie Willy Wonka’s Chocolate factory? In this movie, those lucky holders of the golden ticket are granted access to Willy Wonka’s chocolate factory. I like to compare your preapproval letter to the golden ticket given to these lucky recipients in the movie. Without the golden ticket there is no entry into the chocolate factory; however once the golden ticket is presented the doors to this amazing chocolate factory are opened. Veterans, you will notice once you have received your preapproval letter you too will have many more doors opened to you. Realtors and sellers will be much more likely to take you seriously with your preapproval letter.

What will you need to send to your mortgage representative to get your preapproval started?

For a VA purchase loan, you will need the following:

· your last two year’s W-2 statements.

· One month’s worth of paystubs.

· Form DD214 (not necessary but helpful)

This information is needed on all applicants which are normally the veteran and his/her spouse.

The reason we need your last two years W-2 statements is to verify how much money you make on average each year. The reason we will need eight months worth of pay stubs is to get an idea on average  how much money you are currently making with your current employer. In addition, to determining how much money you make your pay stubs also verify current employment. Your form DD 214 allows your VA lender to expedite ordering process of your certificate of eligibility. Approved direct lenders with the Department of Veterans Affairs have the ability to order your certificate of eligibility, which will determine if you can or cannot get a VA loan, over the internet directly from the VA. most veterans or active duty military who are applying for a home loan do not realize that the speed upon which they are getting approved is determined by how quickly they can get these necessary documents to their VA loan officer.

What will the VA loan officer or VA lender do once they have your information as described above?

Once your VA loan officer has the three items outlined above, he will plug all of your information such as employment, income, assets and liabilities if applicable into his loan origination software. Once your information is entered into the software a VA loan analysis must be run by an approved VA processor or loan officer. The VA loan analysis is a form which will indicate to the lender whether or not you can afford the home that you were trying to purchase. The VA loan analysis is a relatively simple calculation. The calculation is outlined below:

(Monthly Income)- (proposed mortgage payment+insurance+taxes+utilities for that house+monthly credit card payments due) = RESIDUAL INCOME.

What is residual income?

Reschedule income is how much money you have left over to survive with after having paid all of your necessary obligations. The VA does not want someone to buy a home that is so expensive that home does not allow them to make all of the necessary payments on time. The VA has set up certain criteria for necessary residual income based on what part of the United States who have been, how large family is, the age of your children and older variables. For example, the amount of residual income needed for a single person living in eastern Ohio will be lower than the residual income required for a family of six living in Northern California.

The VA loan process from application to loan closing/funding.

Once your VA loan officer has done your VA loan analysis and determines whether or not you can afford your home your loan will be submitted to an automated underwriting engine. The most common used automated underwriting engine is DU or desktop underwriter. Within moments of submitting your loan to the automated underwriting system, your loan officer will know whether or not you are eligible for the loan and at that point you will be denied or preapproved! As you are already aware if you are preapproved venue will be issued a preapproval letter so you may start making offers on different homes of your choice.

Let’s now assume you have made offers on a bunch of different homes and decided to pursue the home of your choice. At this point in time, you will need to be working with a real estate agent and you will need to execute a purchase contract or purchase agreement with the seller. After you have unexecuted purchase agreement you will return that purchase agreement to your loan officer and your loan process will now begin. Your loan process could take anywhere from about two weeks to five or six way depending on a couple different variables. Though it is very easy to blame your VA loan officer should things not go as quickly as you have intended, there is a lot that you can do to speed up the process. The following is a list of things involved in the loan process that may take time over the next 2 to 5 weeks:

· Title insurance must be ordered and issued

· An appraisal of the property must be done

· Home owner’s insurance must be set up and put in place

· Verbal and written verification of employment will be done on applicants

· any adverse credit may need to be cleaned up or discussed

· a VA underwriter needs to review all documents and issue final approval

· closing needs to be scheduled

though the list above may not appear complex or detailed, it is important to understand that in today’s tight economy with increased financial guidelines your loan approval and processing will take longer than it has in the past.

So what can you do to make sure you are well prepared to buy a home with a VA loan?

As I mentioned in the very first paragraph I have spent my entire professional career working with veterans and active-duty military in getting approved for their hard earned VA home loan benefits. If you take anything away from this article it is that you should be educated and make sure you’re working with a legitimate VA approved lender, bank or mortgage company. Here at we have taken the guessing game out of your hands. If you submit your loan inquiry for preapproval on our website you can rest assured that we will put your information into the hands of an approved VA lender in your area. Our website is designed to educate all those looking to find out more about their hard earned VA home loan benefits.

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