A step-by-step guide for how to get prequalified and preapproved for a VA home loan.
If you're planning to use a VA loan to buy a house, you're going to come across many new terms like "prequalification" and "preapproval." Both are important to the homebuying process and can help you better understand your budget and guide you toward appropriately priced properties.
Knowing your purchasing power shows sellers that you're a serious buyer with a solid bet of following through on your offer.
Many new homebuyers often confuse a prequalification with a preapproval. Both preapproval and prequalification are ways lenders verify a borrower's readiness for a home loan.
The main difference is, a preapproval is a lender telling you how much they'll lend you based on tangible, proven information such as your financial and credit history. A prequalification is how much a bank will lend you based on unproven information. You'll answer a series of questions about your income, estimated credit score, employment and cash reserves.
Lenders then issue an estimate of how much financing you'll receive based on that information.
While both of these should be the first steps you take, getting pre-approved can help you better understand your budget and guide you toward appropriately priced properties.
Are you looking to buy a home using your VA loan benefits? Here's how to get approved for a VA home loan first:
Before applying for preapproval, you’ll want to have some financial documents on hand — particularly ones pertaining to your income, debts, and monthly expenses. Good documents to gather up include your most recent paystubs and tax returns, as well as statements regarding any loans, credit cards, and investments you might have.
Picking what VA mortgage lender you’ll use is the next step. Only approved mortgage companies can offer VA loans, and your best bet is one who’s highly experienced in these mortgages — or one who specializes in VA loans altogether. This will ensure you have the smoothest, most efficient loan process possible.
You’ll next need to fill out your VA lender’s preapproval form. Some mortgage companies may call this “prequalification.”
Regardless of what it’s called, you’ll usually need to enter details regarding your income, debts, credit, and other financial information when filling out these forms. You’ll also need these details for any spouse who’s applying for the loan with you. The lender will use this to evaluate your financial capabilities and potential risk as borrowers.
You’ll need a Certificate of Eligibility from the Department of Veterans Affairs before you can get approved for your VA loan. While you can log into your eBenefits portal and request your COE yourself, a good VA lender can actually do this on your behalf, streamlining the process significantly and alleviating some of the hassle.
Talking to a loan officer is the next step, and it’s when you’ll delve further into your finances and overall homebuying goals. The loan officer may also have follow-up questions regarding the form you submitted or other details regarding your financial situation.
Once your lender and loan officer has reviewed all your information, you’ll get an official preapproval letter. This will indicate that you’ve been conditionally approved for your loan, and it will also have an estimated loan amount you’re eligible to borrow. You can use this number to guide your home search.
You should also include the preapproval letter in any offers you submit. This can give sellers more confidence in your offers — not to mention your ability to purchase their home quickly and without issue.
Mortgage preapproval letters are typically good for 60 to 90 days. A lot can change with your credit history, income, and interest rate in this time period. For this reason, VA loan preapproval letters may need to be updated if they are no longer an accurate representation of your current financial situation.