What Happens After You Apply for Your VA Loan?
There's plenty of preparation involved when buying a home with your VA entitlement. You'll find yourself searching the internet for homes in an area you'd like to live and wonder what it would be like to live in a particular house in particular neighborhood. You'll play with a few mortgage calculators that will estimate mortgage payments for you and you'll start paying more attention to your real estate agent as you get closer to finding your new home. And then…you sign a sales contract and the ball really starts to get rolling. Now what can you expect?
Most likely you've already applied with a VA lender and received your VA loan preapproval. This step includes completing a VA loan application and allowing your lender to review your income, bank statements and credit report. Now that you have a property selected, your VA application becomes "official" and your fair share of paperwork will arrive in your inbox.
Your VA lender will begin documenting and validating the information included in your loan application. You'll be asked to supply fresh paycheck stubs, bank statements and sign several disclosures illuminating different parts of your VA loan. Your lender will also order an updated credit report.
You'll also receive your Good Faith Estimate of Settlement Charges that identifies potential loan charges that you or the seller will be responsible for. These fees will later be compared with your final charges at your closing.
Ordering the Appraisal
In addition to approving you, the borrower, the lender will also approve the property. This is done by reviewing an appraisal report that provides up to date information on the current condition of the home as well as a list of similar homes that have recently sold in the area. These sales, called "comps" help support the value of your home.
Your lender will order the appraisal by using a third party appraisal management company who will handle the appraisal order, receive the original appraisal and forward the report to your lender.
The Underwriting Process
Once your loan file is documented and the appraisal and other reports have been completed the entire package will be electronically submitted to the underwriter. The underwriter is the person at the VA lender's office that determines whether or not your loan application complies with VA lending guidelines.
During the underwriting process, the underwriter may need clarification on specific parts of a file or ask that the file be updated. These requests are called loan conditions, so-called because the underwriter indicates a loan approval "on condition" that the requests made are satisfied.
Once the underwriter has determined the loan meets all necessary VA lending requirements, the loan is sent to the closing department which prepares your closing documents you'll sign at the settlement table.
The Last Step
At your closing, you will be provided with your share of closing documents which include copies of original documents sent to your lender as well as updated documents awaiting your signature. You will also review your Settlement Statement which itemizes all financial transactions related to your loan.
Vendors who performed services for you and your loan during the approval process will be listed on the statement along with their amounts charged. For example, your title insurance company provided a title insurance policy and requests payment, as do others related to your VA loan approval.
The settlement statement will highlight how much money is needed from you once your final paperwork is signed.
The closing agent will collect all necessary documentation from you as well as a cashier's check needed to cover any fees you owe not yet paid. The closer will then send the documents back to the lender for review. Once the lender determines your paperwork was handled properly, the lender will instruct the closing agent to release all funds and record your sale.
Congratulations, you're a homeowner!
Grant Moon is founder and President of VA Loan Captain Inc., which assists veterans with VA loans, and author of a soon-to-be-released guide on VA loans.