The year 2024 will mark a new decade in the housing market. As a veteran considering using your VA home loan benefit, choosing the right lender is key to a smooth homebuying process. We will walk you through everything you need to know to select the best VA mortgage lender for your situation in 2024 and beyond.
Understanding VA Loans
Let’s start with a brief overview of VA mortgage loans for anyone new to the program. Private lenders issue VA loans backed by the Department of Veterans Affairs (VA). It allows eligible veterans, service members, and surviving spouses to purchase a home with no down payment requirement and competitive interest rates.
VA loans are dramatically different from conventional loans that require large down payments of 20% or more. The VA home loan guaranty allows lenders to offer more favorable terms because the government assumes the risk of default. If the borrower defaults on settling the loan, the VA will fill in a portion of the costs.
Key Features of a VA Loan
- No down payment required – Borrowers do not need any money out of pocket for a down payment or closing costs. The entire purchase price can be financed.
- Competitive interest rates – Rates tend to be lower than conventional loans, thanks to the reduced risk for lenders. VA loans have become particularly affordable in 2023 and are expected to remain competitive through 2024.
- No private mortgage insurance (PMI) – Conventional loans with less than 20% down require expensive monthly PMI payments. VA loans do not carry this additional cost.
- VA funding fee – A one-time funding fee of 0.5-3.6% of the loan amount is paid upfront and factors in the borrower’s military service record.
- Loans up to $647,000 in most areas – The loan limit increases annually and was raised to $647,000 for 2023 in high-cost regions. Limits are lower in other parts of the country.
- No prepayment penalty – Borrowers can pay off the loan early with no fees, allowing flexibility to refinance for a better rate later on.
Understanding these advantages is key when deciding if a VA loan is the best home financing option. The guarantee allows veterans access to inexpensive, low-risk mortgages.
Choosing a VA Lender
With so many lenders offering VA loans, deciding who to work with can feel overwhelming. Here are some important factors to consider when selecting the right VA mortgage lender for your home purchase in 2024:
Experience with VA Loans
Look for a lender that specializes in VA financing and has a proven track record successfully closing these types of mortgages. Experienced lenders will be familiar with VA guidelines and programs, streamlining the process. They also tend to have strong relationships with VA offices to resolve any issues quickly.
Reputation and Reviews
Research lender reputations online through third-party sites like the Better Business Bureau, Bankrate, and Rocket mortgage reviews. Check for consistent customer satisfaction and few complaints. Also, ask other veterans for personal recommendations of lenders they worked with successfully. Positive reviews suggest a lender that treats borrowers well.
Loan Offerings and Rates
In addition to competitive interest rates, find a lender providing the loan product that best fits your needs, whether a 30-year fixed, 15-year fixed, or adjustable rate VA loan. They should offer competitive products at all phases of the homebuying cycle, from pre-approval through closing.
Streamlined Process
The best VA lenders have systems optimized to handle VA loans from start to finish with minimal delays. Look for lenders known for quick turnaround times on pre-approvals, appraisals, and closings. An easy application and transparent timeline lets you focus on home searching.
Local Availability
Consider lenders with physical branches nearby for convenient in-person assistance during the process. Local branches also handle issues faster than those miles away. Some top online lenders also serve most areas effectively without a physical presence.
Fees
While the VA allows certain fees, steer clear of lenders pushing extra costs or unexplained charges onto borrowers. Reputable VA lenders build transparency and minimize outside fees when possible.
Evaluating a few potential lenders based on these criteria sets the stage for a smooth VA home loan experience. The top choices should be VA experts delivering competitive products and rates through an easy buying process.
Applying for Pre-Approval
Getting pre-approved for a VA loan amount is a smart first step in the home search process. It allows you to shop for properties with confidence, knowing your estimated budget. Here’s how to apply:
Gather Documentation
Have copies of W-2s, pay stubs, bank statements, military discharge paperwork (DD-214), and other financial documents ready to provide. This may include tax returns from the past two years.
Complete the Application
Most lenders offer online or printed applications. Provide all personal and financial details truthfully and completely. Inquire about any specific VA requirements your lender needs to verify your eligibility.
Prepare for the Property Appraisal
While not conducted until an offer is accepted, be prepared for the VA appraisal process. Maintain your property in move-in-ready condition without needed repairs. This prevents issues delaying the closing.
Expect a Quick Turnaround
Leading VA lenders can provide pre-approvals within a week once all documents are received. This allows immediate property searching. The approval estimates your maximum budget but isn’t a guarantee the exact loan amount will be available later.
Stay in Touch Periodically
Check-in with your lender if the search drags on for months while interest rates and the market shift. They may need refreshed paperwork or employment/income verification to retain the pre-approval terms.
With a pre-approval in hand, start browsing homes within your estimated price range. Work closely with your VA lender through any changes throughout the process. Their guidance navigates a smooth home purchase experience.
Making an Offer and the Appraisal
After finding the perfect property, it’s offer time. Here’s what to expect once your bid is accepted by the seller:
Provide the Sales Contract
Your real estate agent submits the signed purchase contract to the lender, who will order the mandatory VA appraisal. This valuation confirms the home meets requirements and supports the loan amount.
Prepare for the Appraiser
Ensure full access to the home and provide any requested documents about repairs/improvements. The appraiser considers property condition and recent sales of similar homes.
Review the Appraisal Report
If the home value meets or exceeds the purchase price, no issues arise. But if it appraises lower than the agreed price, you may need to renegotiate or contribute additional cash upfront.
Resolve any Issues Quickly.
Work with your lender and realtor if value shortfalls or appraisal addendums listing repairs crop up. Your VA loan processing won’t continue until the price matches the appraised amount.
Finalize Underwriting
With a satisfactory appraisal, your lender finalizes income/asset documentation and ensures you qualify. This pre-closing underwriting approves or denies the VA loan. Contingencies must also be removed.
Smooth cooperation between all parties finishes this stage on schedule for the final steps towards closing. The VA appraisal process protects both borrower and lender interests in the transaction.
Closing Preparations and Completion
When underwriting approval comes through, the clock starts ticking towards closing day. Ensure you’re ready to finance and receive the keys:
Order Homeowners Insurance
Submit proof of homeowners or condo insurance policy minimums to the lender. Coverage must be active by closing.
Schedule the Closing
Work with your title/escrow officer and realtor to pick a date within 30-45 days. This timeframe may shrink in a hot market.
Complete Disclosures
Sign final loan documents itemizing rates, fees, and terms a few days prior. Review carefully and ask the lender any questions.
Wire Funding
If necessary, wire the VA funding fee or other closing costs due from you to the title company.
Final Walkthrough
Inspect the property ensuring no changes or damage occurred before taking possession at closing.
Closing Appointment
Meet at the title/escrow office to sign the remaining paperwork, receive keys and take ownership of your new home!
Advance preparation along every step of the VA loan process results in closed loans on schedule. Staying organized and responsive secures the home with this invaluable veteran benefit.
Maintaining Your VA Loan
Even after settlement, there are responsibilities as a VA borrower:
- Make timely monthly payments. Late fees can arise, and poor payment history impacts credit. Set up auto-pay if possible.
- Keep the property occupied as your primary residence. The guaranty depends on this crucial owner-occupancy condition.
- Maintain home insurance continuously as required. Provide annual proof of policy renewal to the lender.
- Refinance strategically if rates drop substantially. But beware of recapture fees and losing the guaranty if refinancing too early in the loan term. Consult the lender.
- Contact the lender regarding any significant life events impacting finances like job loss, medical issues, or divorce. They may offer hardship options or advice in tough times.
