How does the VA loan closing process work? How long does it take to complete? What are the steps that lead up to it, and what can I expect on the big day?
In this article, you will see the VA loan closing process explained. The objective here is to provide you with a better understanding of what happens throughout the VA loan closing process so you can plan your home purchase accordingly.
What Does It Mean to ‘Close’ on a House?
The final stage in the home-buying process is closing. It’s the day you sign all the paperwork necessary to become the legal owner of your new home. Signing your mortgage loan documentation, as well as additional documents such as the deed of trust and the closing statement falls under this process.
This is also when you’ll pay your closing expenses and down payment for a VA loan. When you apply for the loan, you should get an estimate of these charges, followed by a finalized breakdown a few days before the actual closure.
VA loan closing processes are usually managed by a title or escrow company. These companies specialize in obtaining and finalizing all of the paperwork required to close a real estate deal. You can attend the closing in person by going to the title or escrow company’s office, or you can do it online by using an electronic signature.
The objective here is to tie up all the “loose ends” associated with the sale of the home so that the home buyer can take possession of their new property.
The closing procedure is largely the same whether you use a VA loan or a standard mortgage product. In both circumstances, the house buyer will review and sign several documents and pay for any remaining closing fees. These documents are VA loan closing documents, trust deed, closing statement and VA Loan Closing Disclosure.
It is critical to understand the required documentation when closing on a home with a VA loan. VA loan closing documents provide mortgage terms, such as interest rates and payments, and serve as your contract with the lender.
The trust deed serves as collateral, describing the risks of late payments. The closing statement is a financial report card that includes a breakdown of all transactions. The VA loan Closing Disclosure obtained before closing outlines the final house purchase costs. It promotes transparency by assisting purchasers in understanding the financial issues prior to the closing date.
VA Loan Closing Steps
We need to zoom out and look at the other processes in the home-buying process to have a better grasp of the VA loan closing process. Let’s start at the beginning and work our way through it.
Here are the usual steps a person goes through when using a VA loan:
- Get a Certificate of Eligibility (COE) and submit it to the lender.
- To narrow down your search, get pre-approved for a loan amount.
- Make an offer on a house, including an earnest money deposit.
- Give the signed purchase contract to your lender.
- Wait for a VA-approved appraiser to assess the residence.
- Allow for the completion of the mortgage underwriting procedure.
- Provide any extra information requested by the underwriter.
- Perform a final walk-through of the house before closing.
- To know your finalized expenses, see the Closing Disclosure document.
- Attend the closing and go through all loan documents and transfer paperwork.
- Use a cashier’s check, certified check or wire transfer to pay the closing costs of a VA loan.
- Get the keys to your new home!
As you can see, a lot happens prior to the actual closure, and many different people are involved. However, in most circumstances, the procedure moves seamlessly. According to the VA’s data, house purchasers using VA loans can get from application to closing in around 44 days on average.
The Average Costs for Home Buyers
VA loan closing fees often consist of title searches, mortgage origination, loan processing, document preparation, and other things. Basically, whenever someone provides a service to assist in the acquisition of a property, they charge a fee for it, such as a VA loan closing agent or a VA loan closing attorney.
These specialists are skilled in gathering and finalizing the necessary papers to facilitate a seamless transfer of property ownership. These experts assist in making the VA loan closing process run more smoothly and legally.
The precise amount you must pay on closing day will be determined by a variety of factors. VA loan closing costs typically vary from 2% to 5% of the home’s purchasing price. This can build up to a substantial amount of money, so start saving early on in the process.
How Long Does It Take to Close?
How long does it take to finalize a VA loan? Understandably, this is another often-asked question among property purchasers who use this program. Most individuals want to get done with the home-buying process as soon as possible since it can be overwhelming and time-consuming.
As mentioned earlier, the VA loan closing timeline tends to be somewhere between 40 and 50 days. That’s the average length of time between the initial VA loan application and the final closing process, according to an analysis conducted by the Department of Veterans Affairs.
To determine this, the VA used data provided by Ellie Mae. This company, now known as ICE Mortgage Technology, provides loan processing software to the mortgage industry. Their software is used to process many of the home loans generated in the U.S. each year.
The VA also uses this data to dispel a common myth or misconception about VA loans taking much longer to close than conventional mortgages. As the VA.gov article stated:
“Fact: They close as fast as the others, and they’re also more likely to close than conventional and FHA loans.”
How to Keep the Process on Track
Certain aspects of the VA loan closing process will occur without your direct participation. The escrow agent, for example, will collect a range of papers from different third parties involved in the transaction. And in most cases, the house buyer is not involved.
However, you can take specific proactive measures to help keep the closing process on track, including good communication and timely delivery of documents.
When the underwriter evaluates your loan file during the mortgage underwriting process, you may get further requests for information or documents. For instance, the mortgage underwriter may seek a letter of explanation for a particular bank transaction.
Suppose you receive such a request in the days coming up to your closing; attempt to respond as soon as possible. This will assist in keeping the procedure on track and avoiding unnecessary delays in your VA loan closing process.
The VA loan closing process is a testament to commitment to those who have served, opening doors to homeownership with respect and gratitude.