There are many individuals who, if it were not for a VA loan, would not be in a financial position to build a home. One of the biggest pluses of a VA loan is no required down payment. VA guaranteed loans are available to eligible veterans; and for details concerning eligibility rules, visit the U.S. Department of Veteran’s Affairs Website. The ‘guarantee’ in VA guaranteed loans means the lender is protected against loss if you fail to repay the loan. This type of assurance takes the place of a normally-required down payment.
Due to the collapse of the housing market, new construction represents an element of risk that lenders are very aware of; and because of that, some lenders are hesitant to provide mortgages for new construction.
So, the challenge, if you will, is to find a lender that is willing to offer what is termed a “construction-to-permanent” mortgage, designed to cater to new construction, with minimized inherent risks. It is a new type of financing that is helping veterans acquire new construction loans during a time when lenders are, understandably, wary.
With this type of financing, you’ll begin with a construction loan from the builder and then you’ll finance that short-term loan into a long-term mortgage. As with any loan, there are certain qualifications that must be met.
Many veterans may not realize they do not need a copy of their Certificate of Eligibility known as COE, to start the lending process. It is entirely possible to become preapproved even before any COE is confirmed. Once the COE is required, some lenders are happy to obtain the COE for the veteran.
Preapproval will give you a realistic indication of what you can afford. This is not a guarantee but simply means the loan officer is ready to begin the initiation of the loan process based on your pertinent, financial data. Of course, there are conditions that must be met.
A preapproval letter is extremely important since its purpose is to inform all relevant parties that personal information concerning you has been reviewed by a certified VA lender. Psychologically, this letter acts as an “earnest indicator” to display your sincerity with using VA benefits. The conditions stipulated in the preapproval letter have parameters that cannot be modified, such as changing one’s debt-to-income ratio. If one’s debt-to-income ratio were to change and it no longer mirrored the ratio stipulated in the letter, one’s preapproval would become null and void, plain and simple.
Assuming all is going well, you will enter into a purchase agreement and the loan officer will order an appraisal. Your financial details, such as tax statements and credit scores, as well other vital information, will all be intimately scrutinized by an underwriter to ensure the loan application meets the VA guidelines as well as the lending institution’s requirements.
Once you make it to the “Clear-To-Close” stage, you can wipe the sweat off your brow! At this point, you will have a secure commitment regarding the VA mortgage financing.
In a nutshell, these are the basic steps involved in the VA home loan process:
— Contact a VA-approved lender
—Fill out the required application
—Determine your VA loan eligibility
—Sign a purchase agreement
—Wait patiently for the underwriting review
—Establish a closing date to finalize the VA loan
And here’s the fun part–
—Take ownership of your new home!
Only the very basics have been covered here. Contact a VA loan specialist for all the details. Best of luck with pursing that American Dream!
Miss Carlson is a retired teacher who likes to write in her spare time. A few of the topics she covers are VA loans and new homes Dallas.