VA Mortgage - Step by Step Process to Secure VA Home Financing
Getting a VA Mortgage is a simple process but many are not sure where to start. Let's simplify. We'll give you a step-by-step process to follow to ensure you get the funding you need and choose a home you CAN afford.
Decide What you can Afford
Decide How Much Home You Can Afford - Rule of thumb for a VA Mortgage - Your monthly mortgage bill can be NO GREATER than 29% of your gross monthly income. So how can know how much house you can afford?
Say you annual salary is $49,500. Divide by 12 to get your monthly gross income.
Monthly gross income = $4125
Our monthly housing payment needs to be no more than 29% so we take 4125 x .29 = $1196.25
So now you know that to conform to VA mortgage rules you can afford a home that costs you $1196.25 per month - this includes principal, interest, tax, ( no insurance as VA loans are not required to carry a monthly mortgage insurance premium)
How do we know HOW MUCH house this will buy?
Let's assume the VA interest rate is 6% and the term is 30 years. If you want to only spend $1196.25 you should look for a home costing no more than $199,482. Here is a handy affordability calculator to help you back into a desired home price.
You should take this one step furthur and realize that you NEED to account for TAX. Say your real estate tax bill is $2000 annualy - or $166 monthly. To be safe subtract this monthly tax from your desired monthly mortgage bill which leaves us with $1066 as our NEW monthly mortgage cost bring our target home price range to about $177,900.
This exercise can be a real eye opener for you... Why not be prepared and take control of what you need to know!? This is where so many first time home buyers get into trouble - NOT BEING REALISTIC regarding "How much they can afford"
Search For a Home
This is the fun part. After you've crunched numbers using the above method you should have a good idea of what home price range you can afford, comfortably.
Browse the internet or talk to real estate agents and search within your price range - this is should keep you busy for a while!
Home Found - Make a Deal
You found he home you want! Great...you now need to discuss the purchase with the seller or their agent. If you can agree on the price sign a purchase agreement contingent on your loan approval.
Find a VA Lender
Find a qualified VA lender - they should ask you for your COE (certificate of eligibility). Then you need to complete the loan application.
A word to the wise...shop at least 3 mortgage lenders before commiting. Interest rates vary as well as mortgage fees. Rule of thumb - pay NO MORE than a 1% origination fee and NO YSP. You can learn all about this worthless hidden fee called YSP and how it increases your monthly payment here
Just the fact that you mention 1) you are shopping and 2) you will only pay 1% origination fee and no YSP will give you credibility as a smart mortgage shopper, minimizing the chance for predatory lending. Even VA lenders are prone to predatory tactics...mortgage brokers have no fiduciary responsibility to educate you...only to abide by RESPA laws - YOU need to learn as much as you can about your mortgage!
Home is Appraised
Whew...ok, you've found a morgage broker you like and will work on your terms. At this point all your credit and income should be verified and you qualify for a VA mortgage. The home will now be appraised by a licensed VA home appraiser - reasonable value will be confirmed.
Approval
Typically as long as you have no credit issues and the home appraises for what it's worth you should get a thumbs up on your loan.
Close on Your Home
The final step is to attend the closing, sign the mountain of paperwork and you get the keys to your new home
Loan is Funded and Insured by VA
Your COE is documented to confirm your entitlement and paperwork is returned to you.
Summary
As you can see, many of the steps are routine and administrative in practice. Your main concern is EARLY on - that is KNOWING and being realistic regarding the price range off the home you wish to buy. Many VA borrowers get into trouble because mortgage brokers STEER borrowers into more home than they can afford - setting them up for potential foreclosure. Dont worry about bad credit either SEE: Va loan Bad Credit
Keep the 29% rule firmly in mind as your TARGET price range and you should be fine
Refinance VA loan info:
