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VA Loans: Processing and Underwriting Conditions

There are many types of home loan programs available to consumers today, but the VA home loan program continues to be the most popular choice. This is due to its numerous benefits and limited conditions that the borrower must meet to qualify.

Nevertheless, it's essential to understand some of the primary considerations borrowers must keep in mind during their VA loan processing and underwriting processes, including requirements related to income and credit score.

These loans feature more flexible processing and underwriting conditions than conventional mortgages. However, they come with certain limitations that lenders must follow to comply with the Department of Veterans Affairs and federal regulations. This article will walk through everything you need to know about VA loans processing and underwriting conditions. Read on to find out more.

The VA Loan Processing

The first step in your VA loan is getting it processed. VA home loan processing can seem complicated to the uninitiated, but there’s nothing to fear if you have an experienced mortgage lender by your side to help you through the process. The processing of a VA home loan includes many steps, including gathering pertinent information, document verification, credit evaluation, and appraisal. These tasks are all necessary to ensure that you’re approved for a VA loan and that you can purchase your property at a price within your budget.

You may have heard of a VA appraisal that happens during processing. But what does it entail? And how does it help you get into your new home? The appraisal is an estimate of your home’s value, used to determine its worth and establish a loan-to-value ratio, and it’s critical to getting a mortgage. It’s ordered by your loan processor, who then submits it to the VA, which has final approval over both your home and appraised value.

The processor will then send your contract to your insurance company and begin processing it, after which you'll get a commitment letter. Your title company will conduct a review of public records related to your home purchase, looking for liens, legal claims, and easements. The objective of a title search is to ensure no issues on a property that needs to be paid off before you can take it.

The loan processor will track down any remaining documentation and paperwork and ensure it is appropriately assigned before final closing. In most cases, a title company representative will also visit your home to inspect certain essential factors, such as the landscaping and condition of your home. After everything checks out, they'll write a title insurance policy for you that protects against any property defects discovered after you close on your loan.

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How Long Does the Processing Take?

The processing of a VA home loan is relatively simple and doesn't typically take a long time. Once it's determined that you're eligible for a VA home loan, VA will collect some specific documents to determine what rate and terms should be approved. The lender will later approve or deny your loan based on their analysis of these documents and other factors such as your income and credit history.

When applying for a VA home loan, your lender may give you conditional approval, but don't be discouraged. The word conditional may sound intimidating, but it doesn't have to be. Your application can be assigned a conditional approval status for several reasons: Maybe you forgot to include one document, or your credit score doesn't meet the minimum requirement (as just two examples). Lenders will typically tell you what specific criteria must be met before they can offer you a full approval status.

The Underwriting Process

After a loan is processed, it enters into the VA underwriting, which means a lender examines your credit record to determine if you're eligible for a loan. You can learn more about credit reports here. If all goes well with your underwriting checkup, then you get notified that you are approved. The underwriting process has many steps and can be lengthy, but your closing date will be set once completed.

Underwriters will request several things like tax returns or more pay stubs before giving you the final approval. Generally, there are various conditions, and each file is different. Below are some questions your underwriter might be interested in:

  • Has your income and employment status changed?

  • Have you made any significant bank deposits that need additional documentation?

  • Are there any appraisal liens against your property?

  • If you’re already a homeowner, have you been late on mortgage payments in the past 12 months?

VA loan underwriting is a very competitive process, and your application may need additional documentation. If your loan officer requests you to submit other documents, please do so as soon as possible. The faster you move, the quicker your lender will move toward resolving the requirements and getting you closer to closing day. It's essential to work with a lender that can guide you through each step of the way.

Bottom Line

A VA loan allows qualified veterans and active service members to borrow money to finance their first home with no down payment and low closing costs. But despite their many benefits, VA loans are subject to various processing and underwriting conditions that you must meet to qualify and receive the loan amount from the lender or lender-approved mortgage insurance company (LIMC).

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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