If you are a qualified military member who wants to obtain a VA mortgage loan for the purpose of buying a home, you may be surprised to know that while the VA does guarantee your loan, they are not the actual institution that gives you the funds to use for the home purchase. Once you understand the loan approval process and associated requirements needed for your loan, you will be able to better manage your time when it comes to looking for a home in your price range. VA mortgage loans are approved by banks, and other mortgages lending agencies. These lenders use a set of guidelines during their loan approval process that have been established by the VA.
VA Mortgage Loan Approvals
The VA can get involved in the mortgage loan approval process if the lender is in need of some additional information to make the final decision on your loan. Also, they can be brought into the approval process if there are some questions about certain government rules and regulations. When they become involved, the VA has the authority to make the final loan decision on your mortgage loan.
You can also apply for a pre-approval mortgage loan before you begin to look for a new home. By knowing the maximum amount of the loan you are able to obtain, you will then be able to decide on which home is right for you that is within your price range. If you are unable to get pre-approved for a VA mortgage loan, due to high debt-to-income ratio, or you have damaged credit that you are still repairing, you can use the time to take care of the problems. Knowing exactly what is required in order to get an approval will save you the time of looking for a house and negotiating the purchase price with the seller.
VA Loan Requirements
In order to qualify for a VA mortgage loan, you must be able to meet two VA requirements that are used in making the loan decision. First, you must be able to show enough income to cover all of your current debt payments, including car loans and revolving credit cards. Your income must also be able to cover the new VA mortgage loan payment. This is called the residual income method.
The second method that is used is a formula-based analysis of your income, as it relates to your current and projected debt. This analysis is called the debt-to-income ratio.
VA Loan Process
The VA does not require you to complete a mortgage loan application until you have decided on which home you want to buy. If you have had credit issues that you are currently in the process of resolving, or if you have a large debt you are about to payoff that will significantly increase the amount of income at your disposal for total debt coverage, the VA suggests that you wait to fill out the mortgage loan application until such matters are resolved.