There are some estate agents who will not accept offers on buildings if the buyer cannot prove that he or she has the borrowing capacity. A pre-approval letter from a VA loan vendor is often enough proof to allow an offer. Plus, if you get pre-approved, then you have a better idea of your buying power, which allows you to scale up or down your expectations. Here is a little more information about pre-approval and why it is such a good idea.
Approaching The VA Lender
All of the VA Lenders are loan companies in the private sector. They are then charities, and they are not affiliated with a government agency. As a result, each is able to offer its own terms and conditions, along with its own interest rates and so forth. You are not forced to stick with a single lender. You can get in touch with several of them to see which has the best deal for your circumstances. For example, there are some that may treat you worse if you have a bad credit rating, and some that embrace you with open arms.
Since everything is online these days, applying to one lender is similar to applying to another. It is a little like applying for a credit card. For example, you can go onto their website and they will have things like quote tools and eligibility tools. As you work through the tools, they are going to ask for documents.
The Documents You “May” Need
To be very clear, the bullet point list below offers an example of some of the documents you may need. Do not be intimidated by the list, you won’t need all of them. For example, if you were not permanently injured during your service, then you won’t need documents to prove your disability income.
• Copy of your photo ID from a government-issued service. Your driver’s license or passport should be fine.
• Copy of your DD-214 document for veterans. You will have to re-apply for these if you have lost them.
• A points statement or suitable alternative paperwork for reserve veterans and national guard veterans.
• A statement of service letter that was signed by a commanding officer. You will have to ask the VA loan for guidance on what is needed.
• Copy of your last two years’ worth of W-2 statements and a copy of recent pay stubs.
• Self-employed people need to prove their federal tax returns for the last two years.
• Proof of income and tax returns for rental income or 1099s.
• A copy of your main bank statements from the last few months.
• VA awards letter documenting VA disability percentage and monthly income amount
• A copy of recent retirement account statement
• Proof showing Social Security monthly income amount
• A copy of your divorce decree
• A copy of court papers specifying child support obligations
• A copy of court papers specifying alimony obligations
• Childcare statement that shows monthly costs or a lack thereof
A lot of the process is automated, so if there are any gray areas, then you should lean towards the positive rather than the negative. For example, if you are pretty sure your child support payments are going to end in the next few months, then do consider leaving them out of your application.
VA lenders are using the AUS (Automated Underwriting System), and there are many times when eligible people are refused. On the one hand, you can go to other lenders and see what they say. Or, you can ask for a manual underwrite because you strongly believe you should have been approved.
Budgeting For Success
To be frank, you need to be sure you can afford the loan and the payments. Some people try to jump into the process because there is no opening deposit. However, paying for your own house is not like paying for rented accommodation. Use a VA Loan Calculator like WhatsMyPayment and figure out how easily you can pay for the loan and how much you will have left over for things like house insurance, repairs, and so forth.
Is My Credit Rating Affected?
Yes, your credit rating is affected, but this is only after starting the process. When you are nearer the beginning of your journey, looking at calculators and eligibility checkers and so forth, then it is all soft searches. However, as you move further forwards, they are going to have to take a look at your credit rating, which is going to leave a search on your history, which will negatively affect your credit score. Luckily, the effect is pretty weak (unless you have multiple searches very recently), plus even if you overdo it with your applications and searches, they are deprioritized after six months. In other words, if you mess up your credit rating a little bit, you can wait six months, apply again, and your credit rating will be back to how it was (or better if you have been working on it).