VA loans offer good deals
4. Home appraisal. Your lender will ask the VA to assign a VA-approved and licensed appraiser to determine the value of the home you wish to purchase, based on its condition and recent selling prices of comparable homes in your area.
5. Prepare to pay the funding fee. The VA assesses a several-percentage-point funding fee that varies depending on what type of veteran you are, the size of your down payment, and whether you are financing for the first time, second time or doing a refinancing. You may be able to make arrangements for the seller to pay these fees as part of the purchase price. If not, you will have to pay the fee yourself either before or upon closing. The fee table is available on the VA's website.
6. Loan approval. As long as your income and credit score are acceptable to the lender and the home is appraised at a reasonable value in relation to your negotiated purchase price, the lender will generally approve your loan.
7. Closing. You will schedule the closing to take possession of your new home. At the closing, you (and your spouse, if you have one) will sign the mortgage note and other related papers.
8. Guarantee. After the closing, the loan documentation is sent to the VA for the loan guarantee. Following this process, the VA will return your certificate of eligibility with a note stating that you have used your VA mortgage loan entitlement.
Refinancing and subsequent purchases
While many lenders have put the kibosh on cash-out refinancing, the VA is a viable market for such deals as long as you have sufficient equity in your home and the loan-to-value ratio meets VA standards, subject to an appraisal. VA guidelines permit a 0.5 percent interest rate reduction on a refinancing, but the overall funding fee is higher for a subsequent refinancing loan.
Veterans can use their eligibility more than once to obtain a loan on a new owner-occupied home, but as with subsequent refinancing, subsequent mortgage loans carry higher funding fees, although those fees can be reduced with a higher down payment. National Guard and Reserves veterans pay slightly higher fees for a first-time home mortgage loan and a first-time refinancing, although the fee for subsequent use of the mortgage and refinancing benefit is similar to regular military.
If you used your eligibility and allowed the buyer of your home to assume your loan, then you are not eligible for a subsequent purchase or subsequent refinancing through the VA, according to Pickel.
However, if the buyer who assumed your home has sold it to someone else, you can take steps to get your eligibility back and use it again. You must obtain documentation that the home was sold and go to the VA and update their records, a process that can take some time but that may be worth it if your other mortgage financing options are limited, Pickel says.