So you’ve found the right home, and you’re under contract. What comes next?
For starters, you’ll almost always want to invest in a home inspection. Inspections aren’t required, but they’ll give you a deeper look at the property and its possible problems. You’ll also need an appraisal and a final review of your loan file by the lender’s underwriting staff.
Your role in this is incredibly important. Some military buyers expect to skate through the loan process and often find themselves frustrated by standard documentation requests in underwriting. The fact is that lending guidelines today are stricter industrywide.
A simple shift in perspective can mean a world of difference in your home financing experience. You should come to the table prepared to prove to an underwriter that you’re an excellent candidate for mortgage financing.
Inspection & appraisal
The inspection and appraisal are your chance to vet your new home for any major issues before you fully commit to buying it. Most purchase contracts contain contingencies that allow buyers to walk away from the deal if an inspection reveals problems or an appraisal comes in low. In fact, an appraisal is required for VA purchase contracts.
Let’s make one thing perfectly clear: An inspection is not an appraisal. For most veterans and military buyers, an appraisal should never take the place of an inspection.
Let’s look at the purposes of each item:
- Includes structural reports
- Includes detailed information about a home’s electrical systems and overall condition
- Includes detailed information about a home’s water and sewage
- Is typically paid upfront by the buyer
- Is required for most loan types, including VA
- Is conducted primarily for the purpose of valuing a property
- Will not include structural reports or a detailed assessment of the property’s major systems or condition
- Is typically paid upfront by the buyer
Your real estate agent may be able to recommend quality home inspectors in your area. Lenders will order an appraisal on the property.
With VA home loans, the government assigns an independent appraiser to conduct the appraisal. If you’re using your VA loan benefit, then you should allow plenty of time for an appraisal. Most VA appraisals are completed within two weeks, but timelines can vary depending on where in the country you’re located and other factors.
Loan processing & underwriting
Loan underwriters are extensively trained in the business of making approval determinations on home loans. That means they’re on the front lines of maintaining a healthy housing market. It’s a role they take very seriously.
Underwriters scour every loan file looking for discrepancies or gaps in information. They have a responsibility to follow ever-changing lending guidelines, which means they often operate under the “more is better” philosophy when it comes to loan documentation.
Don’t panic if your loan officer requests more documents after you’re under contract. Loan files almost always require more information and documentation. What’s important is answering those questions and returning key documents as soon as possible.
What to avoid
A few common mistakes can throw your loan off track and lead to a seemingly unending string of documentation requests.
Until your loan is closed and funded, try to avoid the following:
- Opening new credit accounts
- Letting other lenders pull your credit
- Getting a payday or other personal loan
- Co-signing on any loan
- Closing credit accounts
- Changing jobs
- Transferring money between accounts
- Making large cash deposits into your accounts
In short, the best way to keep your loan on track is to maintain stability. Make your payments on time, curb your spending, and stay put. Lenders will take another look at your credit and employment situation before your loan closing.
After your loan is approved, there are still a couple of steps to complete before you get the keys to your new house.
Your lender will work closely with your title agent or attorney to prepare your final closing documents. These documents will detail how much money you need to bring to your loan closing, if any. A closing underwriter will review the documents if any last-minute changes are needed.
Be sure to talk with your loan officer if you have any questions about the cash you need to close or anything else related to this milestone.
In some cases, your mortgage will fund the same day, meaning you could leave your closing meeting with keys in hand. Lenders will need to obtain an “Alive and Well” statement at the time of closing for service members and their families using power of attorney.
Though it might be difficult in your most stressful moments, it’s helpful to remember that the road to loan approval has been designed to protect you from dangerous real estate market fluctuations that can result from faulty loan decisions.
The experts guiding you through the home loan process create a system of checks and balances that helps to support your investment, long-term security, and financial health.
This article was written by Chris Birk, director of education at Veterans United Home Loans and author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.”
NMLS 1907 (www.nmlsconsumeraccess.org) Veterans United Home Loans is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency; does not reflect DOD endorsements. Equal Opportunity Lender. 1400 Veterans United Drive Columbia MO, 65203.