Mortgage preapproval is incredibly important in today’s homebuying market. Getting preapproved shows sellers and real estate agents that you’re a committed and qualified homebuying candidate. Some listing agents and sellers won’t even accept a purchase offer from buyers without a copy of their preapproval letter.
Preapproval provides buyers with a clear understanding of their purchasing power and the steps needed to reach closing day. However, keep in mind that preapproval isnt always a guarantee of financing. With preapproval, youll have a realistic view of what you can afford, enabling you to make a strong offer without stretching yourself too thin.
Preapproval is a more detailed process than prequalification. Other than pulling your credit reports, lenders basically rely on your word and your best estimates of what you can afford during the prequalification conversation.
During the preapproval process, lenders want to verify information. You’ll typically need to provide financial documents like pay stubs and bank statements and sign non-binding forms and paperwork. Lenders will be looking at cold, hard numbers and creating the most realistic picture possible of your purchasing power.
This is one area where you have a lot of control – the faster you return paperwork, the faster your VA loan process moves.
Getting preapproved for a VA home loan is one of the most important steps for military service members and veterans looking to buy a home this year. Preapproval provides proof that you qualify for a mortgage loan up to a certain amount giving you a significant competitive edge in today’s housing market.
In this comprehensive guide, we’ll walk through everything you need to know about getting preapproved for a VA home loan, from documents required to the step-by-step process Whether you’re a first-time homebuyer or you’ve purchased a home before, read on for tips to make your VA loan preapproval smooth and successful
What is VA Loan Preapproval?
VA loan preapproval is when a lender evaluates your finances and officially approves you for a home loan up to a specified amount before you start house hunting.
Preapproval is based on a review of your income, assets, credit history, and service record. It provides concrete proof to home sellers that you are qualified to purchase a home.
The preapproval letter states the maximum loan amount you can borrow. This gives you a budget target while house hunting so you don’t waste time looking at homes you can’t afford.
Why Get Preapproved for a VA Home Loan?
There are a few key benefits to getting preapproved for a VA mortgage:
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Know your budget. VA preapproval tells you the maximum home price and loan amount you can afford. This prevents disappointment later if you fall in love with a home that’s out of your price range.
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Strengthen your offer. Sellers often prefer offers from preapproved buyers. It shows them you are a serious buyer who has already been vetted by a lender.
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Speed up the process. Much of the legwork for underwriting happens during preapproval. This streamlines the loan process once you’re under contract.
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Lock in rates. Most lenders let you lock in an interest rate with preapproval. This protects you from rate hikes while house hunting.
VA Home Loan Preapproval Process
Now let’s look at the step-by-step process to get preapproved for a VA mortgage loan.
Step 1: Choose a VA Mortgage Lender
Start by researching VA lenders and choosing one to work with. Look for an established lender with strong reviews and a history of closing VA loans.
Many Veterans go with Veterans United since they are the #1 VA lender in the country. But shop around and compare quotes from multiple lenders. Consider local banks and credit unions as well.
Look at factors like customer service, interest rates, fees, and technology when comparing lenders. Finding the right loan officer match is also key for a smooth experience.
Step 2: Complete a Loan Application
Once you select a lender, you will need to complete a mortgage loan application. This can be done either online, over the phone, or in person.
Be ready to provide basic personal information:
- Full legal name
- Date of birth
- Social Security number
- Current address
- Service history
You’ll also need financial information such as your income, employment details, assets, debts, and expenses.
Providing an accurate picture will help the lender make an informed preapproval assessment.
Step 3: Submit Required Documentation
In addition to filling out an application, you will need to supply documentation to verify the details. This is a key part of the preapproval process.
Here are some common documents VA lenders request:
- W-2s from the last two years
- Recent pay stubs covering one month
- Two months of bank statements
- Certificate of Eligibility (COE)
- DD214 military discharge paperwork
Additional documents may be needed depending on your employment and income sources. Be ready to provide any requested records quickly to expedite preapproval.
Step 4: Credit Check and Underwriting
The lender will pull your credit report and review your FICO credit scores. In most cases, a minimum 620 FICO score is recommended for VA loan approval. However, some lenders may approve scores as low as 580 or 600.
They will assess factors like your payment history, balances, and recent inquiries to determine your creditworthiness.
Your documents and financial information will also go through underwriting review. Underwriters examine your income, assets, debts, and service record to confirm you qualify.
This involves verifying employment, evaluating monthly debts, and checking the value of your assets. They want to ensure you can comfortably afford the loan.
Step 5: Get Your Preapproval Letter
Finally, it’s time for the preapproval letter! This official letter states you are eligible for a VA-backed mortgage loan up to a specified dollar amount.
Preapproval letters are typically valid for 60-90 days. The letter has an expiration date and your rate lock period.
You can now confidently start hunting for homes listed under your preapproved loan amount.
In some cases, a lender may come back with a prequalification rather than full preapproval. This still provides an estimated price range but without official approval. Ask the lender what else you need to graduate to full preapproval if this occurs.
What Do VA Lenders Check for Preapproval?
VA lenders analyze a variety of factors when reviewing your application for preapproval. Here are some of the key items they evaluate:
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Credit scores – Minimum scores between 580-620 typically needed depending on lender.
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Income – Your earnings need to be sufficient to cover the loan payment and other obligations.
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Employment – Stable jobs and at least two years of employment history preferred.
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Assets – Funds for a down payment and closing costs improve chances.
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Debt-to-income ratio – Your total monthly debt compared to gross monthly income. Below 41% is ideal.
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Military service – Honorable discharge and service meets VA minimum requirements.
Providing proof in all these areas results in the best shot at preapproval. Be ready to explain any red flags or weaknesses.
Documents Needed for VA Preapproval
Lenders need to verify all the details and figures from your application. That’s where documentation comes in.
Have the following VA preapproval documents ready – this will accelerate getting approved:
Identification Documents
- Driver’s license or government-issued ID
Income and Employment Documents
- W-2s or 1099s from the past two years
- One month of recent pay stubs
- Two years of tax returns
- Proof of any additional income sources
Asset Documents
- Two months of bank statements
- 401(k) or investment account statements
- Documents showing funds for your down payment
Military Service Documents
- Certificate of Eligibility
- DD214 discharge paperwork
Credit Report
- Your lender will pull this report
Gathering paperwork can feel tedious, but it’s a must. Promptly provide any additional documents the lender requests.
How Long Does VA Preapproval Take?
Once you submit a full application and required documents, VA preapproval typically takes anywhere from a few days to a couple weeks.
Here are some factors that influence timelines:
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Responsiveness – The faster you provide documents, the quicker lenders can process your application.
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Credit scores – Lower credit scores often require more review.
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Application date – Late fall application dates may take longer due to holiday slowdowns.
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Loan program – Conventional and FHA preapprovals are often quicker than VA.
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Employment – Self-employed and applicants with contract jobs take more time.
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Down payment – Preapproval moves faster with at least 5% down.
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Preparer – Mortgage brokers sometimes have longer timelines.
Ask your lender for a realistic timeline at the start. Follow up if you don’t hear back when expected.
Can I Get Preapproved with Bad Credit?
Yes, it is possible to get VA preapproved with bad credit – but your options will be more limited.
Here are some tips for getting VA preapproved with poor credit:
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Shop with lenders who work with lower scores. Some consider applicants with scores as low as 580.
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Rapidly pay down credit card balances to lower your utilization ratio.
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Hold off on new credit applications until after closing.
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Ask co-borrowers with better credit to apply with you.
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Explain any red flags or past credit issues to your lender.
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Improve your credit before applying if possible.
While poor credit makes approval tougher, VA loans are an option for those with less than stellar scores. Preapproval is based on your full financial picture.
7 Tips for a Smooth VA Preapproval Process
Follow these tips and best practices for the best shot at a quick, painless preapproval:
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Shop lenders – Compare mortgage rates and fees from 3-5 lenders. Ask friends for referrals.
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VA Home LoanPayment Calculator
Here’s a look at some of the key factors involved in VA loan preapproval:
Gather Income and Employment Information
You don’t need a job to secure a VA loan – just ask retirees. It’s more an issue of whether you have a stable, reliable income that’s likely to continue. There’s an array of income types, and some are more stable and reliable than others.
For most VA borrowers, their primary income source is a job, whether it’s serving in the military or working in the civilian world.
A solid employment history says a lot about your ability to repay a loan. The gold standard of employment for many lenders is two years of reliable, full-time employment, ideally with the same employer. But real-world resumes aren’t always this pristine.
That’s why the VA and lenders allow flexibility when it comes to employment standards. There are no clear-cut “pass/fail” employment criteria. Rather, each applicant is considered on an individual basis, with a focus on three key measures:
- Is employment reliable?
- Is employment likely to continue?
- Is employment income sufficient in amount?
Having a gap in your employment history isn’t uncommon. But lenders will want to take a closer look if you’ve had some time without a job in the lead-up to pursuing a home loan.
You may need to have been back to work for a certain number of months before lenders can move forward. Changing jobs during or even right after the loan process can also affect your chances of closing.
How to Get Pre-Approved for a VA Home Loan
How do I get a VA backed home loan?
Buying a home is a complex process, and getting a VA-backed loan is only one piece of the puzzle. Stay on track by following the steps below. You’ll need to show your COE to your lender as proof that you qualify for the home loan benefit. Find out if you qualify for a COE Apply for your COE now
How do I get a VA loan preapproval?
When you’re ready to get started on your VA loan preapproval, contact an approved VA home loan lender to start the process. Top VA loan lenders are able to confirm your VA loan eligibility by pulling your Certificate of Eligibility through the VA’s automated system.
Is prequalification a first step in the VA loan process?
Yes, prequalification is the initial step in the VA loan process and is generally quite simple. It provides an estimate of how much you might be able to borrow based on the information you provide to the lender. You can think about loan prequalification as a “first interview” of sorts. Prequalification helps lenders achieve three main goals:
What is a VA preapproval letter?
A preapproval letter will typically list a series of conditions that need to be met in order for the loan to move forward. These conditions help protect both lenders and borrowers in case things don’t go as planned or financial circumstances change. How long does a VA preapproval take?