Best Practices For the VA Loan Process
VA Loan Best Practices
If you are an active service member, spouse, or dependent, the chances are great that you have heard of VA Loans. You may have even looked into them or read about them somewhere on the internet. A few weeks ago, we published an article explaining why you should consider using this fantastic military benefit to purchase your next home. Today, I’d like to offer some further insights into this benefit and offer you some best practices when using this benefit that you’ve earned.
Determine Your Home Needs
It is important to understand first that not all vendors are equal when it comes to using your VA loan benefit. When looking for a vendor, first identify the type of home you are looking to buy or build. Some vendors specialize in the purchase of a condominium and do not deal with manufactured homes. Some vendors are willing to lend for new home builds, while others do not. So, identifying what you want is step one.
VA Loan Purchase, My Story
When we purchased our first home, a new build, in 2008, I used my VA loan through our bank, USAA. The process, while longer than we expected as first-time homebuyers, was pretty straight forward. We got a good rate and I think that was because USAA does a lot of business in home loans. They are a large and well established bank.
By contrast, we just purchased a home in northern Virginia a few months ago. Our first stop was USAA because we have a very long history of banking with them. While they gave us a rate better than the last one, we shopped around and found a local bank that was able to beat USAA’s rate. Because USAA was larger, they did not have the flexibility to match the rate of the smaller lender.
When you do find a vendor that suits your home buying needs, make sure you ask them how many VA loans they’ve processed and handled in the past. Some banks do not like to deal with VA loans because they feel the gateway to becoming a qualified buyer, i.e. your Certificate of Eligibility, is lower and therefore more risky. My wife and I have encountered that before.
An easy solution to this problem is using the right realtor. We’ve used realtors for both of our home purchases, and I can not tell you enough how valuable their expertise comes in, especially when dealing with lenders.
In our story above, where one of the lenders we contacted refused to work with VA loans, our realtor gave us a list of local lenders he had dealt with in the past that were friendly to the VA loan option. We were already approved by USAA, so shopping around was not going to hurt us.
It was one of the lenders from his list that we ultimately used to finance our home. We would not have considered them because they are a smaller financial institution from this area. It was a pleasant surprise to learn that they preferred the VA loans to other traditional finance options.
Need a Lender?
If you are looking for a lender, here are some that have a solid history working with the military community to maximize your VA loan benefit.
- USAA – I’ve mentioned above that USAA is our go-to financial institution for almost all of our banking needs. They have a streamlined process that allows you to get pre-approved online, and they assign you a loan officer that stays with you throughout the entire process. For VA loans, they offer a 15 and 30-year option, as well as a 30-year VA Jumbo loan for financing amounts larger than $510,400.
- Pentagon Federal Credit Union – This is another bank that is extremely popular within the military community, and for good reason. They also offer the standard 15/30-year VA loan, but they also highlight 15-year Fixed Rate Conforming loan, which offers a fixed-rate and 97% financing for first-time homebuyers. This loan adds the benefit of a faster payoff with predictable payments.
- Navy Federal Credit Union – I’m not a Navy guy, but I am impressed with this financial institution. Like the other two, Navy Federal offers both conventional and VA loans, but they specialize in VA loans. While VA loans do not require private mortgage insurance (PMI), Navy Federal makes that clear up front. They have a cool feature called Freedom Lock, which locks in your rate for 60 days. So, no matter what happens with the economy, your rate will not change at all during the buying process. Finally, if you need a realtor but don’t know how to find one, they offer a RealtyPlus program, which matches you to highly-rated realtors in your area; but, you must become a member.
When working with your lender, make sure you ask questions about anything that confuses you. They want your business, so it serves them best to make sure you get your answers. Here are a few to start:
- How many VA loans do you process compared to conventional loans?
- Do I qualify for zero down?
- Will you help me get my VA Certificate of Eligibility? (They’re supposed to help you with this if you need it.)
- Am I exempt from the VA Funding Fee?
- Do you match offers from other lenders?
The Best Banking Site
It is extremely easy to find VA lenders via the internet. A quick internet search for “VA Lenders” at the time of this writing brought back over 180 million results. However, that doesn’t mean they’re all the same. Don’t you wish there was a place you could go and find a collection of highly rated mortgage lenders, specific to your location? Well, there is.
In 1999, I was looking for information on financial products and I found Bankrate. Originally, I just needed help finding the best CD rates because I was a young, unmarried soldier, and I wanted to park my money in places that would net me a return.
The website has come a long way over the past twenty years, and one of its coolest features is the mortgage lender reviews. On this page, you can sort by state and they will display the highest rated mortgage lenders in your area. These ratings aren’t given by Bankrate, they are the opinions of customers. Using this tool may lead you to a lender, and ultimately into your new home!
Next Steps – VA Loan Best Practices
Okay, so let’s break this article down. Here’s what you need to do if you’re in the market for a home:
- Decide. What kind of home do you want, and where do you want it?
- Find a Realtor. We use realtor.com to find agents when we rent or buy.
- Get your Certificate of Eligibility. Log into the eBenefits site to apply.
- Secure lending. Knowing you’re pre approved for a home is a good feeling and can make the process so much easier. Many realtors can recommend lenders they’ve worked with, but if you want to compare rates, use Bankrate to shop around.
It’s time to find your home! Happy hunting, and thank you for your service.
(Image courtesy of Merio from Pixabay.com)
- The VA Loan, A Military Benefit You Should Use
- VA Loan Limits 2020
- VA Loan Requirements: What You Need to Know
- Military Benefits Changes For 2020