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VA Loans - 5 Guiding Factors and Relative Information

Article By: Supatra Chowdhury

Application required for VA Loans is not so complicated:

1. Apply for a Certificate of Eligibility. A veteran who doesn't have a certificate can obtain one easily by completing VA Form 26-1880, Request for a Certificate of Eligibility for VA Home Loan Benefits and submitting it to one of the Eligibility Centers with copies of your most recent discharge or separation papers covering active military duty since September 16, 1940, which show active duty dates and type of discharge.

2. If you are a first time home buyer you should decide on the home you  want to buy and sign a purchase agreement.

3. Order an appraisal from VA. (Usually this is done by the lender.)

4. Apply to a mortgage lender for the loan. While the appraisal is being done, the lender (mortgage company, savings and loan, bank, etc.) can be gathering credit and income information. If the lender is authorized by VA to do automatic processing, upon receipt of the VA or LAPP appraised value determination, the loan can be approved and closed without waiting for VA's review of the credit application. For loans that must first be approved by VA, the lender will send the application to the local VA office, which will notify the lender of its decision.

5. Close the loan and the buyer moves in.

Obtaining VA Loans 

VA Appraisal - Certificate of Reasonable Value

The CRV (certificate of reasonable value) is based on an appraiser's estimate of the value of the property to be purchased. Because the loan amount may not exceed the CRV, the first step in getting VA loans is usually to request an appraisal. Anyone (buyer, seller, real estate personnel or lender) can request a VA appraisal by completing VA Form 26-1805, Request for Determination of Reasonable Value. After completing the form, it can either be mailed to the Loan Guaranty Division at the nearest VA office for processing or an appraisal can be requested by telephoning the Loan Guaranty Division for assignment of an appraiser. The local VA office may be contacted for information concerning its assignment procedures.

The appraiser will send a bill for his or her services to the requester according to a fee schedule approved by VA. To simplify things, VA and HUD/FHA (Department of Housing and Urban Development/Federal Housing Administration) use the same appraisal forms. Also, if the property was recently appraised under the HUD procedure, under certain limited circumstances, the HUD conditional commitment can be converted to a VA CRV. The local VA office can explain how this is done.

It is important to recognize that while the VA appraisal estimates the value of the property, it is not an inspection and does not guarantee that the house is free of defects. First time home buyers or those interested in a rent to own home, should be encouraged to carefully inspect the property themselves, or to hire a reputable inspection firm to help in this area. VA guarantees the loan, not the condition of the property.

Application

The application process for VA financing is no different from any other type of loan. In fact, the VA application form is the same as that used for HUD/FHA and conventional loans. The mortgage lender verifies the applicant's income and assets, and obtains a credit report to see that other obligations are being paid on time. If all is well and the appraised value of the property is enough to cover the loan needed, the lender, in most instances, can then close the loan under VA's automatic procedure. Only about 10 percent of VA loan applications have to be submitted to a VA office for approval before closing.

VA Residential Mortgage Loans

VA Residential Mortgage Loans help you to buy a home, including a townhouse or a condominium unit in a VA approved project  

• To build a home,

• To simultaneously purchase and improve a home,

• To improve a home by installing energy related features such as solar or heating/cooling systems, water heaters, insulation, weatherstripping/ caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA. These features may be added with the purchase of an existing dwelling or by refinancing a home owned and occupied by the veteran. A loan can be increased up to $3,000 based on documented costs or up to $6,000 if the increase in the mortgage payment is offset by the expected reduction in utility costs. A refinancing loan may not exceed 90 percent of the appraised value plus the costs of the improvements.

• To refinance an existing home loan up to 90 percent of the Va established reasonable value or to refinance an existing VA loan to reduce the interest rate,

• To buy a manufactured home.

VA Loans- Costs 

A basic funding fee of 2.0 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent.

A funding fee of 2.75 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 2.25 percent and a 10 percent down payment will reduce it to 2.0 percent.

The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent.

Veterans who are using entitlement for a second or subsequent time who do not make a down payment of at least 5 percent are charged a funding fee of 3 percent.

NOTE: For all VA home loans, the funding fee may be paid in cash or it may be included in the loan.

In addition, reasonable closing costs may be charged by the mortgage company. These costs may not be included in the loan. The following items may be paid by the veteran purchaser, the seller, or shared. Closing costs may vary among companies and also throughout the nation because of differing local laws and customs.

VA loans costs may include VA appraisal, credit report, loan origination fee (usually 1 percent of the loan), discount points, title search and title insurance, recording fees, state and/or local transfer taxes, if applicable, survey

No commissions, brokerage fees or "buyer broker" fees may be charged to the veteran buyer.

About The Author 

Supatra Chowdhury, is an international research scholar and a part time content writer. She has written high quality articles for many websites and has also done editing and copywriting. Ms Chowdhury works for Freelance Writer organization, and is a contributor to www.super-mortgages.com .