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How To Get A VA Loan

VA Appraisal - Certificate of Reasonable Value

The CRV (Certificate of Reasonable Value) is based on an appraiser's estimate of the value of the property to be purchased. Because the loan amount may not exceed the CRV, the first step in getting a VA loan is usually to request an appraisal. Anyone (buyer, seller, real estate personnel or lender) can request a VA appraisal - by completing VA Form 26-1805, Request for Determination of Reasonable Value. After completing the form, it can either be mailed to the Loan Guaranty Division at the nearest VA office for processing or an appraisal can be requested by telephoning the Loan Guaranty Division for assignment of an appraiser. The local VA office may be contacted for information concerning its assignment procedures. The appraiser will send a bill for his or her services to the requester according to a fee schedule approved by VA. To simplify things, VA and HUD/FHA (Department of Housing and Urban Development/Federal Housing Administration) use the same appraisal forms. Also, if the property was recently appraised under the HUD procedure, the HUD conditional commitment can usually be converted easily to a VA CRV. The local VA office can explain how this is done.

It is important to recognize that while the VA appraisal estimates the value of the property, it is not an inspection and does not guarantee that the house is free of defects. Home buyers should be encouraged to carefully inspect the property themselves, or to hire a reputable inspection firm to help in this area. VA guarantees the loan, not the condition of the property.

Application

The application process for VA financing is no different from any other type of loan. In fact, the VA application form is the same as that used for HUD/FHA and Conventional loans. The mortgage lender verifies the applicant's income and assets, and obtains a credit report to see that other obligations are being paid on time. If all is well and the appraised value of the property is enough to cover the loan needed, the lender, in most instances, can then close the loan under VA's automatic procedure. Only about 10 percent of VA loan applications have to be submitted to a VA office for approval before closing.

Requirements For Loan Approval

To obtain a VA loan, the law requires that:

• The applicant must be an eligible veteran who has available entitlement.
• The loan must be for an eligible purpose.
• The veteran must occupy or intend to occupy the property as a home within a reasonable period of time after closing the loan.
• The veteran must be a satisfactory credit risk.
• The income of the veteran and spouse, if any, must be shown to be stable and sufficient to meet the mortgage payments, cover the costs of owning a home, take care of other obligations and expenses, and have enough left over for family support.

An experienced mortgage lender will be able to discuss specific income and other qualifying requirements.

Costs Of Obtaining A VA Loan

Funding Fee

(as of Oct. 1, 1993)

• A basic funding fee of 2.00 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.50 percent and a 10 percent down payment will reduce it to 1.25 percent.
• A funding fee of 2.75 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 2.25 percent and a 10 percent down payment will reduce it to 2.00 percent.
• The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent.

Note: For all VA home loans, the Funding Fee may be paid in cash or it may be included in the loan.

Other Closing Costs

Reasonable closing costs may be charged by the lender. These costs may not be included in the loan. The following items may be paid by the veteran purchaser, the seller, or shared. Closing costs may vary among lenders and also throughout the nation because of differing local laws and customs.

• VA Appraisal
• Credit Report
• Loan Origination Fee (usually 1 percent of the loan)
• Discount Points
• Title Search and Title Insurance
• Recording Fees
• State and/or Local Transfer Taxes, if applicable
• Survey

No commissions, brokerage fees or "buyer broker" fees may be charged to the veteran buyer.

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