Great news! You’ve concluded that the VA home loan program is the perfect mortgage option for you. After confirming your eligibility based on your service, you’re eager to apply and kickstart the process.
But where do you begin? How do you find lenders for VA loans? Are VA loans exclusive to specialized lenders, or do mainstream mortgage lenders also offer them?
Fortunately, the good news continues – there are many diverse mortgage lenders who offer VA loans to military members, veterans, and qualifying spouses. Finding a suitable lender for your home purchase should be a smooth journey.
In this article, we will delve into the accessibility of VA loans across different mortgage lenders.
The Three Main ‘Players’ Involved With VA Loans
Navigating the mortgage process involves several individuals, including home appraisers, underwriters, loan officers, escrow specialists, and more. However, when dealing with VA loans, three main “players” are involved: the lender, the borrower, and the federal government.
In the homebuying process, the borrower is the individual residing in the home and responsible for monthly mortgage payments. The lender is the financial institution supplying the funds needed for home purchase. The federal government, specifically the Department of Veterans Affairs (VA), plays a role by guaranteeing a portion of the loan, mitigating the lender’s potential losses in case of borrower default.
This structure categorizes VA loans as “government-backed” mortgages, similar to FHA loans, which are insured by the Federal Housing Administration under HUD.
So, the primary point for homebuyers to grasp about the VA program is that the VA doesn’t directly provide funds to borrowers. To secure a loan, you apply through standard VA mortgage lenders in the private sector. The VA’s role lies in providing a partial guarantee to the lender.
Let us share a pertinent quote sourced from an article on the Department of Veterans Affairs website:
“This benefit is available from private companies, not the government itself. The Department of Veterans Affairs does not take applications, approve the loans, or issue funds. Private banks, credit unions, and mortgage companies do that.”
Many (But Not All) Mortgage Lenders Offer VA Loans
As highlighted in the introduction, several mortgage lenders throughout the U.S. are VA loan providers to eligible borrowers. However, it’s worth noting that there are several lenders who choose not to participate in this program, citing various reasons.
Different types of financial institutions cater to military members and veterans by offering VA loans. Here are some of the most common VA loan options:
- Traditional Banks: Traditional banks, both national and regional, provides various financial services, including mortgages. While many offer VA home loans, their lending criteria might be more stringent compared to specialized VA program lenders or mortgage brokers.
- Credit Unions: Credit unions, being member-owned, often provide competitive mortgage rates and personalized customer service. Many major credit unions offer VA loans, as a significant portion of their members are current or former military personnel.
- Mortgage Brokers: Just as their title suggests, mortgage brokers act as intermediaries between borrowers and various lenders. Collaborating with a broker grant borrower the access to a diverse range of loan options, often encompassing the VA program.
Why Some Companies Don’t Offer Them
In summary, many mortgage lenders and banks provide VA loans to eligible homebuyers and homeowners. However, some institutions choose not to participate in the program or offer VA loan financing.
There are several factors that contribute to a mortgage lender’s decision not to offer VA loans.
1. An Added Layer of Administrative Complexity
Compared to conventional or “regular” mortgage financing, VA loans can involve additional administrative steps. Best VA loan lenders must follow specific VA guidelines and documentation requirements, introducing a level of complexity to the loan process. Some lenders might choose not to offer VA loans due to their perception of an increased administrative burden.
2. A Higher Level of Perceived Risk
Lenders assess risk when offering loans. Although VA loans are known for their favorable terms, they may carry a slightly higher risk for lenders due to the unique eligibility criteria and the potential for no down payment for VA loans. Consequently, some lenders may prefer conventional loans with larger down payments to mitigate their perceived risk.
3. Focusing on Other Parts of the Market
Lenders often cater to a specific target market or niche. While there are some VA home loan lenders, others may focus on different types of loans, such as FHA or jumbo mortgages. Lenders typically align their offerings with their core business strategy and expertise, and that may or may not include VA-guaranteed mortgages.
What to Do Before You Apply?
As a borrower, you have the flexibility to apply for this program through a traditional bank, a mortgage broker, online VA loan lenders specializing in the program, or even a credit union. Any lender with a “seal of approval” from the Department of Veterans Affairs can offer VA loans.
Wherever you choose to apply for a VA loan, there are certain steps you can take to prepare for the process. Here are some things you might want to do before applying for a VA mortgage loan.
1. Create a Basic Budget for Yourself
Examine your net monthly income, also known as “take-home pay,” and assess your total recurring debts. This forms the foundation for establishing your monthly housing budget. Establishing a maximum spending limit before applying for a loan is important. Additionally, maintaining an emergency fund in the bank is crucial for unforeseen challenges that life may present.
2. Gather Your Paperwork
Whether you choose a traditional bank, a mortgage broker or credit union for your VA loan application, be prepared to provide various financial documents. These may include pay stubs, bank statements, tax returns, and more. Streamlining the application for the VA loan process can be achieved by collecting these documents in advance or familiarizing yourself with the process.
3. Start Saving Money
Although the VA loan companies provides the benefit of buying a house with no down payment, there are still upfront expenses, particularly in the form of closing costs. These expenses can add to several thousand dollars. Initiating saving plans early on positions you well to handle these financial obligations efficiently.
While many mortgage VA loan lenders provide loans to eligible borrowers, it’s essential to recognize that not all lenders participate in the program.
Factors such as specialization, risk assessment, and administrative considerations influence a lender’s decision to offer VA loans. Prospective homebuyers seeking the benefits of the VA loan program should explore a variety of reputable VA loan lenders, considering their unique circumstances and preferences.
This ensures a well-informed choice that aligns with individual financial goals and facilitates a smooth homebuying process.