Getting preapproved for a VA home loan is an important first step for military service members and veterans looking to buy a home using their VA benefits. Preapproval provides proof to sellers that you are qualified to obtain mortgage financing from a lender when you make an offer on a property. This gives you a competitive advantage compared to other buyers. Follow these steps to get preapproved for maximum purchase power with your VA home loan.
Understand VA Home Loan Basics
VA loans help eligible borrowers buy a home with no down payment and avoid private mortgage insurance (PMI). The U.S. Department of Veterans Affairs guarantees a portion of the loan, protecting the lender from loss if you were to default. This allows buyers to qualify more easily.
You must have sufficient income and good credit—a minimum 620 FICO score is recommended. The home must appraise for the purchase price and meet VA property requirements. Maximum loan limits vary by county but often exceed $400,000.
Confirm Your Eligibility
To qualify for a VA home loan, you must have served at least 90 days on active duty during wartime or 181+ days during peacetime. Veterans discharged under conditions other than dishonorable are eligible. Some spouses of deceased veterans also qualify. Reservists or National Guard members with at least six years of service can apply as well.
Request a Certificate of Eligibility (COE) from the VA to confirm you meet service requirements for the home loan benefit. This also specifies your maximum available loan amount.
Get Your Finances in Order
Lenders will thoroughly review your income, assets, debts, and credit as part of the preapproval process. Before applying, take steps to strengthen your financial position:
- Pay down revolving balances to lower credit utilization
- Dispute and fix any credit report errors lowering your scores
- Confirm your W2 and paystub income with your employer
- Gather 2 months of bank statements to document assets
- Draft explanation letters for past issues like collections or late payments
This financial paperwork will be required for preapproval. Having it ready will make for a smoother application process.
Shop Multiple VA Lenders
All VA-approved lenders can offer VA loans, but terms, rates, and fees can vary. Shopping with 3-4 lenders ensures you get the best deal. Compare:
- Interest rates and APRs
- Origination and closing costs
- Discounts for military, veterans, first-time buyers
- Down payment assistance programs
- Prepayment penalties
Ask about loan processing timelines as well. Faster is better when competing for homes.
Local banks and credit unions are good options for personalized service. Online lenders like Veterans First and Navy Federal often offer the lowest rates.
Complete the VA Loan Preapproval Application
After selecting a lender, you will need to complete their preapproval application and submit all required documents. Be prepared to provide:
- COE proving eligibility
- Driver’s license or military ID for identification
- W2s and paystubs covering the last 30 days
- Federal tax returns for the past 2 years
- Last 2 months of bank statements
- Debts listed, including mortgage/rent, loans, credit cards, child support
- Explanation letters for credit issues (optional)
Many lenders allow you to upload documents directly through an online loan portal for easier processing. Submit any paperwork required by your lender to establish your creditworthiness and ability to repay the VA mortgage.
Get Preapproved for Your Maximum Budget
Based on your financial details, the lender will tell you the maximum loan amount you qualify for. This is your preapproval letter, also called a mortgage certificate or prequalification letter. It states a dollar amount and confirms you can afford monthly housing payments for a loan of up to that amount.
Aim to get preapproved for the highest possible loan within your budget. This gives you more leverage negotiating with sellers. Remember property taxes and homeowners insurance will be extra monthly costs beyond just the mortgage payment.
Act Fast With Your Preapproval Letter
VA preapprovals are typically good for 90 days. The clock starts ticking once you get your preapproval letter. Be ready to make offers on homes right away before you have to reapply and get your credit checked again.
Provide copies of your preapproval letter to your real estate agent so they know your price range and can quickly make competitive bids on VA approved properties on your behalf. Your dream home is within reach with a little perseverance and the right financing!
Frequently Asked Questions
How long does VA loan preapproval take?
Preapproval typically takes 2-3 weeks but can be faster with an online lender. Having all your financial documents ready to submit shortens the approval timeframe. Let your lender know if you need to close quickly so they can expedite the process.
What credit score do I need for a VA loan?
Technically you can qualify with a score as low as 580. But ideal VA loan credit scores start at 620 and above for the best rates. Rates increase if your score is below 660 due to higher risk. Focus on getting your score over 700 before applying.
Can I get preapproved without providing tax returns?
Lenders always require your last 1-2 years of federal tax returns as part of the VA preapproval process to verify your income. If you are self-employed or receive 1099 pay, returns are mandatory. W2 earners may be able to provide just W2s and paystubs depending on the lender.
Does preapproval guarantee loan approval?
No, preapproval is not a guarantee. It states you qualify based on unverified information provided. The final loan approval happens after you have a purchase contract on a home and complete the full underwriting process including appraisal. The preapproval shows sellers you can likely obtain financing.
How much over asking price should I offer with a VA preapproval letter?
In competitive markets, 5-10% over asking price is typical with a preapproval letter in hand. VA financing gives buyers an edge over conventional loans requiring down payments. Go in with your best offer if you really want the home.
In Summary
Preapproval serves as your passport to purchasing with a VA home loan. It opens doors to begin placing offers and turns you from a prospect into a serious buyer in the eyes of real estate agents and sellers. Following these steps will lead you to a smooth preapproval process resulting in a strong loan offer letter.
