VA Loan Guide for Chattanooga TN
What’s a VA Loan?
A VA is a special loan option that is provided by private lenders for veterans, service members, and select military spouses. This loan option requires no down mortgage. The U.S. Department of Veterans Affairs (VA) serves as the guarantor of this loan.
Historically, this loan started in 1944 when the government of the United States decided to assist returning service members to buy homes even if they don’t have good credit or down payment. Since its inception, over 24 million VA loans have been obtained. This ensured the active-duty military members, veterans, as well as their families, bought or refinanced a house.
At this moment, the VA loan now plays a major role in guaranteeing the welfare of military personnel, veterans and their families. Recently, it has become more difficult than ever before to get loans because the lending requirements are now tighter. However, the VA loan option makes life easier and more comfortable for the beneficiaries.
The fundamentals of the VA loan
The VA home loan program is useful for:
- Purchasing a home
- Building a home
- Purchasing and renovating a home at the same time
- Purchasing a lot and/or manufactured house
It is worthwhile to understand that the U.S. Department of Veterans Affairs does not offer loans to anybody. This is similar to what is obtainable with the Federal Housing Administration (FHA) program. Nevertheless, the U.S. VA acts like a guaranty for any active military personnel, veterans or their family members that want to obtain the VA loan. Well, it is possible for the veterans to fail to pay the loan at the stipulated time. In such a case, the U.S. Department of Veterans Affairs will pay about 40 – 50% of the balance. Notably, the exact percent depends on the total amount of the loan.
What are the requirements for obtaining a VA loan?
If you want to obtain a VA loan, you should understand that there are requirements you must meet. To qualify, you must meet at least one of these requirements:
- You were on active duty for a minimum 90 consecutive days during wartime in the past
- You served a minimum of 181 days of active duty during a peacetime
- You served in the National Guard or Reserves for over 6 years
- You are a widow or widower of military service personnel who died either because of a disability or injury related to active-duty service or in line of duty.
If you meet one or more of the criteria listed above, you can start processing a VA loan.
What are the differences between a VA loan and the traditional loan option?
It is important to understand the major benefits of a VA loan. So, let’s take a look at the differences between VA loans and traditional loans.
- Down payment
A VA loan requires a 0% down payment. That is, you don’t need any down payment to start enjoying the loan. Conventional loans, on the other hand, need down payments that can be as much as 20%.
- Private mortgage insurance (PMI)
Because the U.S. Department of Veterans Affairs supports the VA loans, the borrowers do not need PMI. For conventional loans, PMI is compulsory for borrowers that finance over 80% of the value of their house. This adds to the monthly expenses of such borrowers.
- Interest rates
Due to the guaranty from the U.S. Department of Veterans Affairs, lenders of VA loans feel safe and secure. Resultantly, the interests of VA loans are usually competitive. The lenders of conventional loans are at higher risks. Hence, interest rates are usually higher and less competitive.
- Qualification process
The V.A. guaranty eases the qualification process for VA loans. In fact, as long as the borrowers meet the basic requirements for the loans, it is almost certain that they will get the loans. However, the reverse is the case for conventional loans, which have a stringent qualification process.
Furthermore, all the major differences between the two loan options highlight the benefits of VA loans.
Procedure for getting a VA loan
Do you want to obtain a VA loan? If yes, here is the procedure to follow:
- Determine your eligibility
Before you start speaking to any lender, determine whether you qualify or not. The determination of your eligibility is simple. You only have to look at the requirements mentioned earlier in this post. If you meet any of the criteria, you can apply for the loan.
- Choose a VA-approved lender
For a starter, the U.S. Department of Veterans Affairs does not approve all lenders to offer VA loans. Therefore, you should note whether a lender is approved or not. After getting a list of approved lenders, check out their offers. While a few lenders offer only VA loans, others provide both conventional and VA loans. A VA specialty lender is your best option. This is because their services are usually faster, more effective and easier.
- Get a Certificate of Eligibility (COE)
A Certificate of Eligibility (CEO) is for showing that you meet the basic requirements for the loan. This will allow the lender to understand the amount you qualify for. A lender can assist you with the COE. However, you may need to provide more details of your military service to the lender. Similarly, you should be ready to offer proof of your eligibility.
- Pre-qualify for the loan
This is to help you determine the total amount you can get as a loan. Although the pre-qualified amount may be different from the actual loan, it gives you a reliable idea of the loan amount. Your VA loan consultant can help you with this. Notably, your employment history, credit history, income, marital status, etc. will play important roles here.
- Find a house and sign a purchase agreement
After pre-qualifying the loan, you should have an idea of the kind of house you can buy. So, start looking for a house. If you are looking for Chattanooga TN homes, let a real estate agent help you. When you find a house you like, negotiate with the seller and sign a purchase agreement.
- The lender will take care of the application
The lender is in charge of this step. You only have to submit the signed purchase contract to the lender. Such a lender will process it and order the appraisal of the VA. Expectedly, only a certified appraiser can appraise the contract. The appraisal involves determining the current market value of the home is worth the agreed payment. Also, it allows inspection of the home. If the home does not meet VA minimum property requirements, you may have to find another home. Finally, the appraiser will submit the appraisal to the Department of Veterans Affairs. Once the Department of Veterans Affairs approves it, you can close the deal.
- Close the deal
After approving the loan, the former owner must transfer the property to you. Here, all parties involved will sign the necessary documents. Then, you can move into your new home.
You should understand this procedure may take a few weeks to several months before completion.