There is often a lot of confusion surrounding the nature of VA loans. Many mistakenly believe that simply being eligible for a VA-guaranteed loan means that they will be able to get one. The VA forces no lender to offer or approve any VA loans, so it may be hard to find a good lender that will approve your application for a VA loan. There are a lot of differences between lenders, and it’s important to find a lender that will treat you the best, has the lowest fees, and that you can get along with. It’s important to know what differences you can expect lender to lender so you can discern which lender is best for your loan. The most important differences you’ll find lender to lender are what types of VA loans they’re willing to approve, the fees they charge for their loans, and of course their personality and the culture surrounding their office.
First, the difference between what types of loans they are willing to offer. The VA offers plenty of different options for VA loans. Everything from purchasing an existing home, building anew with a construction loan, buying a manufactured home, buying a condo, buying a multi-unit home, to combining the VA loan benefits of two eligible veterans, having a non-veteran co-sign with a veteran on a loan, and even more options. However, for all these options offered by the VA, lenders are not required to offer them, even if they are a VA-approved lender. Many times, lenders or banks will choose to temporarily suspend one or more types of loans because of what the housing market is like. Currently, a VA-eligible borrower will find it very difficult if not impossible to find a VA-approved lender that will approve a new VA construction loan because of the higher risk involved and the current market.
It may also be difficult now to find a VA-approved lender to do a VA loan for a manufactured or mobile home. Reasons for this vary, and it may be worth asking a lender why they choose to not offer some types of VA loans. Often, their answer will be very enlightening. While these options may be difficult to utilize now, it doesn’t mean that they’ve gone away and will never come back; there may come a time when construction loans are the cat’s meow. For a prospective home-buyer, it’s best to approach the market with an open mind even if they have a preference of the type of loan they’d like to get. For types of loans that most lenders won’t offer, chances are that the lender you find that will is going to offer very unfavorable terms on the loan.
The next big difference between VA lenders is the terms they’ll offer you for your loan. Not everyone will offer you the same interest rate, and it’s best to shop around to different lenders to find the one that will offer the lowest interest rates. It’s usually best to do this with a direct question – e.g. “What is the rate for a VA loan today that’s good for 30 days on a $300,000 30 year ARM with no points?”. Getting rates from multiple lenders is often done via a loan officer and is much more convenient that way, allowing you to compare multiple quotes side by side. But the interest rate is not the only thing that separates lenders; they will also have different fees they charge. The one constant fee that won’t change across lenders is the VA funding fee, because it’s charged by the VA, not the lender. Finding out the closing costs of each lender and adding that to your consideration is a very important part of choosing one.
The last is the personality of the lender and the culture of their office. You’ll want to pick a lender that is going to be willing to work with you if something happens and you face defaulting on your loan. Can you imagine working with a lender that you just couldn’t stand in a situation where you might lose your home? You’ll want to choose a lender whose office carries the type of culture that you might enjoy working in. While this may seem like a frivolous thing to look for in a lender, it becomes quite important in all the arranging of your loan, both before and after closing.