How To Get Pre-Approved For a VA Home Loan?
Getting pre-approved for a VA home loan is the first key step in buying a home as a veteran. Sellers prefer buyers with pre-approvals as it assures them of their credibility. Pre-approved buyers are considered more serious about buying a home as they have gone through a tricky process to just get pre-approved for a VA home loan.
The fact is many sellers don’t even entertain the buyers without pre-approval. They just simply reject the files before they can even make an offer. When you get the pre-approval for a VA home loan and while making the offer you can attach your pre-approval letter to get the preference above others. seller will immediately know that your offer is genuine and have the financial stability and support to offer the good value of the house.
Why Get Pre-Approved For a VA Home Loan?
The journey of home loans for veterans is not different from others but it has its advantages. If you are eligible then you must get pre-approved for a VA home loan, you get the lowest interest rate in the market, don’t have to worry about saving for the down payment, and even if your credit score is average you still don’t have to buy the mortgage insurance.
As for lenders, the process to get pre-approved for a VA home loan is a way of getting acquainted and ensuring that they are lending the money to the right party. Pre-qualification is an unofficial meeting or a casual interview where borrowers and lenders both learn about each other in detail and then decide whether they want to proceed further with each other or not.
A Borrower can do the pre-qualification meeting to get pre-approved for a VA home loan with as many lenders as he/she wants. However, the goals of each lender are the same in this meeting. These goals are :
- A lender wants to assess the borrower’s credit eligibility and military service.
- The lender wants to get the idea of the loan amount borrower is expecting
- The lender wants to make sure what kind of documents they might need to get pre-approved for a VA home loan USA 2021.
All the above aspects help the lender to decide whether they want to loan the amount or not and if the pre-approval process will be easy or difficult. With the help of pre-qualifications meetings, the borrower can compare their options such as interest rate and repayment terms, and so on.
What Question To Expect To Get Pre-Approved For a VA Home Loan USA 2021?
Of course, checking the credit score of a potential borrower will be the priority of a lender but that is not the only one. To ascertain the deeper knowledge of the future and current prospects, a lender might check your overall financial situation. They also want to know your home buying goals to make sure that you get pre-approved for a VA home loan. For example: if you are a first-time buyer or a repeated buyer, if you have any other home loans and if you have are you still repaying them?
All these minor and major details can have a great impact on your VA home loan application. The government has set the minimum credit score limit of 640 FICO score. However, every lender has a different benchmark for the credit score to get pre-approved for a VA home loan. Based on credit score and other factors they decide whether they will grant the loan of full or partial amount.
The other criteria a lender might be interested in are as follows:
- The amount of the loan you are expecting
- Details of current and previous employment
- Your gross monthly income
- Your assets such as bank account or retirement funds
- Your monthly liabilities like daily needs, child-care support, etc. It is to make sure that expenses are at least 40% less than the earnings.
- Previous judgments, bankruptcies, and foreclosures
- Any previous or current delinquencies on federal debts
- If you owned a home already or not
These questions are not uncommon to expect from lenders and you must answer honestly all of them. If you are not sure about any of them then it is better to go prepare. It increases the chances of getting pre-approved for a VA home loan. Although, the response of every lender may differ, depends on the services they provide.
Some money lenders prefer to provide loans to applicants with good credit scores and financial stability only. On the other hand, we respect the services of our veterans to our great nation and thus we offer several programs to improve the bad credit score and to ensure that in near future the borrower will get pre-approved for a VA home loan.
Documents Required
Lenders may ask you to submit few documents to get pre-approved for a VA home loan. It is not necessary to submit all these documents. Documents also vary on person-to-person application. Therefore, we are mentioning all the necessary documents any private money lender can ask you in any situation.
- One of the government Identification can include Driving License.
- A copy of DD-214 or Reserve/Guard points
- Active duty borrowers service statement
- Current pay stubs and W-2s for the last two years
- Bank statement for recent months
- Award letters to confirm the disability
The Credit Check To Get The Pre-Approved VA For a Home Loan USA 2021
A lender needs your permission to conduct a hard credit inquiry or an extensive credit inquiry to know about your actual financial situation. A hard credit inquiry can bring down your credit score by few points. Therefore, it is important to have a high credit score before you allow any lender to conduct an inquiry.
Understandably, you are comparing your options with more than one lender to get the better option but if you allow every lender to conduct a hard credit inquiry to get pre-approved for a VA home loan then you can harm your credit score. Although, credit bureaus expect such sort of thing so they have put a time cap on the credit inquiry. All the hard credit inquiries done by lenders should be done within 45 days when you are seeking a VA home loan and then they will count them as one.
If any inquiry is done after 45 days since the first inquiry then it will count as another one. The minimum credit score set by VA is 640FICO which is a good score but every lender has different requirements so even if your credit score is perfect and you are eligible to get pre-approved for a VA home loan, a lender can still reject your application.
Lenders are the risk-takers and if they feel uncomfortable about your records then they can reject you or might offer you a lower loan amount than you have asked. If you are adding a co-borrower in your VA home loan application then the lender will check their credit score as well. In some states, the lender might even check the credit score of your spouse and consider their debts in the decision-making process.
If your credit score is less than the minimum limit, you definitely will not get pre-approved for a VA home loan. Lenders will also calculate your debt-to-income ratio or DTI ratio. They will calculate this ratio against the loan amount you are expecting. DTI ratio plays a crucial role to get pre-approved for a VA home loan. Veteran Affairs or VA wants to determine that your income is more than your monthly expenses. You must have a DTI ratio of 41% or less to get pre-approved for a VA home loan.