A pre-approved stamp on a contract
VA Loan

Understanding the VA Loan Pre-Approval Process

There’s no feeling quite like receiving the keys to your very own home. While the whole process of buying a house can seem overwhelming, for veterans and servicemen and women, the Department of Veterans Affairs created some great loan options. These powerful loans make the process easier for those who have worked hard for our country. VA Home Loans are valuable mortgage options available exclusively for military members and their families. One of the first steps is to obtain your VA loan pre-approval. Once you’re approved, you can then continue on your home buying journey and work your way to homeownership.

The difference between pre-qualification and pre-approval

Sometimes you may hear the term pre-qualify when starting your home buying journey. It’s important to know that while a pre-qualification can be useful at the early stages of buying a home, it is actually different than getting your pre-approval. A pre-qualification refers to an estimate for credit given by a lender based on information provided by a borrower. These estimates can be helpful, but a pre-approval is much more important.

Pre-approvals are preliminary evaluations of potential borrowers by a lender. These determine the buying power of a buyer, essentially defining how much money the lender is willing to lend. In order to obtain a pre-approval, your lender will need to run a credit report to determine your credit score and debt-to-income ratio.

The first step in starting your pre-approval process is to reach out to a lender. If you’re a military member or veteran, it’s important to work with a lender who understands the ins and outs of working with military families. Having a lender who is also an expert in the VA Home Loan process can be a game changer.

Why pre-approvals are important

Pre-approvals are incredibly valuable and help you determine the price range you can afford. There are a few additional key reasons why they are important including demonstrating to sellers and their realtors that you are a serious buyer. Understanding your buying power is critical before going home shopping. This will help you narrow down your wants and needs in a home and go into the process feeling confident. Your realtor can also use your pre-approval to help you narrow down homes that are ideal for you.

Once you find the home of your dreams and want to make an offer, pre-approvals can help get close faster. Sellers are motivated to move their homes quickly to buyers who are able to purchase at mutually agreed upon prices. With a pre-approval in hand when you make an offer, you’re showing the seller and their real estate agent that you mean business.

What do you need to bring to get a VA loan pre-approval?

Because buying a home is a major investment, your lender will need a variety of documents to get you pre-approved. These are how you prove you’re able to cover your mortgage payments and can afford to buy a home. While most lenders request similar documents, you will want to consult with yours to make sure you provide everything requested. It is also a good idea to keep these handy throughout the process. Examples of documents you may need to provide include:

  • A government-issued ID
  • Tax returns- most lenders request your two most-recent federal and state returns.
  • Proof of income- you can most often show this through W2s and 1099’s.
  • Assets- this includes bank statements and any other accounts like a 401K. Your lender will let you know how far back you need to go when showing statements. They may also request updated statements as the home buying process continues.
  • Any debt you may have- if you have an outstanding loan like an auto loan or student loan, your lender will need to know.
  • Rent payments- these may be important to prove you have been making steady payments.

Additional documents may include divorce papers, bankruptcy papers, and gift letters if anyone is helping you make your down payment.

If you are a veteran or military member looking to take advantage of the VA Loan, you will want to work with a VA-approved lender. In order to apply for a VA Loan, you’ll need to also provide your Certificate of Eligibility (COE). This document proves that you are eligible to use this hard-earned benefit. If you don’t already have your (COE), lenders who specialize in working with military members can help. Read here to learn more about the process of obtaining your COE.

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What if you don’t have the best credit?

Credit scores are numbers that range between 300-850 and depict your creditworthiness. Having a higher score makes you a more attractive borrower to a potential lender. They can also help you get a better interest rate. There are a few key factors that will show up on your credit history and go into determining how high your score is. These include your number of open accounts, total amount of debt, how often your credit has been run, and more.

Many people believe they are unable to purchase a home if their credit score is below 640. At MHS Lending, we offer the Damaged Credit Loan to military members and veterans which helps those who may otherwise have a difficult time getting a loan. Through these loans, we are able to offer second chances, in turn empowering military members to become homeowners.

If you’re ready to start your home buying journey with the VA Loan, our team at MHS Lending are here to help. The benefits of the VA Home Loan are incredibly powerful and are reserved especially for military members and their families. Veteran to veteran, we want to help you make strong, well-informed decisions. Give us a call today to get started on the VA Loan pre-approval process.