5 Steps to Get You Started With a VA Mortgage

The entire process of securing a VA Mortgage explained:

1. Service Eligibility 2. Obtaining your Certificate of Eligibility 3. Funding Fee 4. Choosing a Lender 5. Looking for a house

Who is eligible to take advantage of this program, Step 1:

There are four groups that you could fall into and still be eligible for a Wisconsin, Illinois, Minnesota or Florida VA loan:

1. Veterans Still on Active Duty 2. Discharged Veterans (Regular Military) 3. Current Reserve/Guard Members 4. Discharged Reserves/Guard Members

For Veterans still on Active Duty you will need a statement of service signed and dated by your commanding officer on official letterhead that includes:

Service members name Date of birth Social security number and/or service number Enlistment date The fact that you are still on active duty Contain the phrase No Time Lost (if applicable), or list the time lost If you are in the reserves or national guard, indicate if you are serving under the authority of title 10 or title 32

For Discharged Veterans (Regular Military) you will need to provide a certificate of release or your discharge from active duty (DD214). To obtain a DD214 visit this site: http://www.archives.gov.

For Current Reserve/Guard Members you will need a statement of service signed and dated by your commanding officer on official letterhead that includes the following:

Veteran's full name Social security number Entry date of applicant's Reserve/Guard Duty

The statement must clearly indicate that the applicant is an "active" reservist and not in a control group (inactive status)

For Discharged Reserves/Guard Members you will need a report of separation and record of service, NGB Form 22 or a points statement.

The points statement or other documentation will need to reflect 6 years of participation with evidence of honorable discharge.

Certificate of Eligibility, step 2:

There are several ways to obtain your certificate of eligibility including mailing in your request or automated through us.

Mailing in your Request:

You can obtain your certificate directly from the VA by using VA Form 26-1880, “Request for a Certificate of Eligibility”. After filling in the required information, you will need to mail this to the VA in Winston-Salem, NC with any attached proof of service (usually a DD214 or similar Reserve status forms). The process may take 3 or more weeks. Welcome to government snail mail. If you don't have the patience to mail your request and wait, read on.

Automated Request:

If your entitlement is based on Active Duty service, we may be able to obtain a certificate of eligibility for you online, in minutes. Keep in mind, there is no public option to obtain it online, only lenders have the capability. If you are not eligible to obtain it online, we can then make our request for your certificate within the VA system. You will need to complete VA Form 26-1880 and give us your proof of service, but instead of mailing it to the VA, we upload it directly and usually hear back in just a couple of days!

First Time Use and Request for you Certificate of Eligibility:

If you have never requested or used your certificate, we can still go through the automated system to verify your eligibility. We may not be able to get it instantly, but with a little work from our mortgage professional, we may have your Certificate of Eligibility in 2 or 3 days. Be sure to have the information necessary to fill out form 26-1880 and have your proof of service and we will handle the rest.

Evidence of Military Service:

Refer to Step 1 Service Eligibility for information on obtaining your evidence of Military Service.

How to apply for restoration for a previously used Certificate of Eligibility:

Fully complete and sign VA Form 26-1880, attach your proof of military service and evidence of the sale that of the property that secured the VA guaranteed loan. Generally a HUD-1 or Satisfaction of Mortgage showing the loan has been paid in full. If your loan was assumed, show evidence an eligible veteran has agreed to assume the outstanding balance of the loan and substitute their entitlement for the same amount originally used on the loan. Again, if you give this information to your loan officer, they should be able to obtain your updated certificate much quicker than mailing it to the VA yourself.

The VA Funding fee, step 3:

The Veterans Administration works off of a "guaranty", meaning that they pay the lender 25% of the loan amount should the veteran default on their mortgage. This is the main reason the VA loan program still requires no money down. The VA doesn't make loans, lenders do and the VA guarantees the lender that if a VA mortgage should go into foreclosure, the VA guarantees to the lender 25%.

View the current VA Funding Fee (PDF)

The VA makes things pretty simple when it comes to their loans. First, there is no monthly mortgage insurance on VA loans and secondly, the VA funding fee can be rolled into the loan so that you don't have to bring in additional money to closing to pay for it.

Who is exempt from the VA funding fee?

A veteran may be exempt from the funding fee and VA Form 26-8937, Verification of VA Benefits must be completed by your lender if one of the following apply:

- Veteran receiving VA compensation for service-connected disabilities. - Veteran would be entitle to receive compensation for service-connected disabilities if they did not receive retirement pay. - Surviving spouse of a veteran who died in service for from service-connected disability. - Has received a VA disability in the past.

If you think you are exempt or you are not sure, let us know and we can fax VA Form 26-8937 to the VA for confirmation. The turnaround time is usually 24-48 hours before we would know for sure.

Choosing a lender that will best help you reach homeownership, Step 4:

There are basically 3 approaches to obtaining a VA mortgage. Each has its advantages and draw-backs. Please understand that almost all of these loans are combined into bonds that are sold to large investors that remain anonymous to you. The banks and servicing companies with names that everyone recognizes are collecting payments and handling escrows for a fee and passing the interest on to the bond owner. With this in mind, let's look at the possibilities.

Area banks, credit unions, and branches of national banks usually have a more local feel and name recognition. Many do not deal with VA loans due to the extra work and expense of becoming an approved lender and keeping up with changing guidelines for originating and servicing these loans. Their loan officers are not required to be tested or licensed (they must register in the national data base) and are limited to the rules and regulations of their employer. Underwriting of your file is generally done in the same building where you apply. You may or may not make your payment to the local business, but chances are that your loan has been sold into the bond market with everyone else's. Mortgage brokers are another avenue to a VA home loan. In recent years there has been an abundance of misconduct at every step of the home buying process, from buyers and realtors to banks and bond traders, and the mortgage broker seems to be suffering the most criticism and regulatory backlash. Most mortgages in this country were originated by local brokers bringing buyers and lenders together and getting paid for the service by one or both parties. Brokers and loan originators must be educated, tested and licensed in most states and tested and licensed on the national level also. Brokers do not underwrite or close loans. Every piece of information is passed on to the chosen lender for processing. Correspondent lenders are a third option. Disclosure: I am a loan originator for a correspondent lender. This type of business is hopefully a combination of the best parts of banks and brokers. Like banks, correspondents are authorized to underwrite, close and sell mortgages. Unlike a bank, we can do business with many of the largest loan servicers in the country. These relationships sometimes allow us to offer a customer better terms than a branch of the same company we're going to sell the loan to. Loan originators must meet the same education and licensing standards as a broker on the state and national levels. The entire process is kept within the correspondent's company and the loans packaged and sold later. Most of the people from any of these categories are honest, hardworking individuals trying to make a living in a scary economy. Each of us must work within the boundaries of our type of business and the changing guidelines and regulations. Now the process of choosing a lender can begin. Understand which of the above groups each person you talk to belongs. Ask questions you know the answer to (from one of the earlier posts perhaps). Be wary of a correspondent or banker that offers a great rate but doesn't know how the funding fee works. Or broker

that can't get your Certificate of Eligibility but wants to take a full application today! Once you've found a person with whom you're willing to share your personal financial information, go through the pre-qualifying or pre-approval process. Understand what your credit score is and how it's affecting the transaction. Know what your payment would be at different rates for different mortgage sizes (funding fee included) and different tax and insurance amounts. Your mortgage professional can only give you limits on what you can spend each month on your housing payment. You must decide at this point what you're willing to spend. Find the loan size that's comfortable, stick to it and move on to the next step in the process of getting a home with a VA mortgage.

Looking for a house and choosing a real estate agent, Step 5:

First, I am not a real estate professional and can only speak from experience. The internet has changed the way we shop for most things in our lives. Sellers list their homes on For Sale By Owner web-sites hoping to avoid realtor fees. People with experience buying, owning and selling a house or two may decide to venture into the FSBO market and attempt to purchase a home. Buyer Beware may be a good phrase to keep in mind during this type of transaction. Deals can be found, but much research, time and knowledge will be needed to assure a satisfactory ending. An experienced VA loan originator will be able to help you through the financial aspects of this type of transaction but should not offer answers to real estate questions. These should be handled by an attorney or licensed real estate professional. Choosing a realtor is more than finding a person to drive you from house to house and walk you from room to room. You need to trust this person to represent your interests in what will be one of the most important transactions of your life. Just as I’ve urged that you understand the processes of obtaining a VA loan and finding the right person to deal with your financial issues, I strongly advise that you gather information to ask the right questions and get satisfactory answers before committing to an agent. I could only suggest the names of agents that have completed successful transactions with customers of mine as a place to start. I feel that your loan originator and realtor have different roles to play and for privacy and professional reasons should not appear to be one entity.

I hope this has been a helpful series for those of you looking to use your VA entitlement. If you do have additional questions, please feel free to call or email me.

Detailed program information can be found on our VA Mortgage page of our website.

Inlanta Mortgage is a Mortgage Banker licensed in Wisconsin, Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire and North Dakota. NMLS ID #1016

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