Members of the armed forces and military veterans know that regulations, paperwork, and procedures are the stuff of daily life. So is making mistakes while trying to follow the book. When it comes to securing a Veterans Administration (VA) home loan, applicants can easily go astray. From missing essential application paperwork to messing with their credit, VA loan candidates are only human.
VA loans are secured from lenders but authorized by the federal government. They can be used for buying a new home, refinancing the interest on existing mortgages, or undertake a cash-out refinance. The process for applying for a VA loan is straightforward, but presents some cat-herding challenges for an applicant working with lenders. The applicant first secures a VA Certificate of Eligibility (COE) and then applies for a loan with a VA mortgage lender.
Three Common Blunders That Can Derail the VA Loan Process
Credit red flags
Some applicants don't realize that using credit to incur new debt during the mortgage process can push their debt load beyond VA-approved limits. The End.
From the time the borrower submits a loan application, it's a catastrophic time to run up credit inquires, refinance an existing debt, buy new cars or stop paying your bills. Remember, an underwriter will at least delay the application if they discover an unreported debt. If documentation is off or cannot be found, it's over.
Changes in income or employment
Changing jobs during the application process is another way to create turmoil. As with the credit issues, the borrower may experience delays while the underwriter determines the risk and reliability of suitable income from the new employer. Most underwriters are searching for a more reliable indicator, such as two years of uninterrupted employment in the same field.
Borrowers who are self-employed or who change jobs frequently may not automatically be denied VA loans but they can instigate negative delays in the process while rounding up sufficient documentation to satisfy the underwriters. Simply reporting that a newly taken job shows an increased income and advancement in career, it does not by itself convince potential lenders.
It all comes back to dotting t's and crossing I's. The VA appraiser has some leverage in determining whether homes meet the federal criteria for the loan; they are required to be "safe, structurally sound and sanitary". The appraiser can order repairs on the property. The requirement can put the buyer and seller at odds over who will make the repairs. In some instances, the owner can call off the sale or the borrower can walk away. An appraisal or VA guaranty in no way constitutes a warranty against repairs or structural defects that occur after the sale. At the least, the applicant is once again looking at a huge delay, if not rejection. If the appraisal value comes in dramatically lower than the sales price, it just may be a good time to call everything off.
Veterans can use Lendingtree's Loan Calculator to determine how much their mortgage will be.