Buying a home will likely be your largest life purchase. If you think back to your biggest milestones, like having a baby, getting married or buying your first car, you probably didn't make decisions around them without a great deal of thought.
Buying a house is no different. But while home buyers often spend a lot of time looking for the perfect structure, they don't spend nearly enough or sometimes any time deciding what lender to use for their VA home loan.
When you make the largest investment in your life, you should shop around and find a mortgage lender that will get to know you and your family goals, educate you on the purchase and be your partner through the entire process and beyond.
Good VA home loan lenders see their reputations as the foundation of their business. They can recite most regulations faster than their kids' names, but are willing to admit when they need to go back and consult the guidelines. They believe in making sure anyone they come across in the market for a mortgage is confident and prepared for what's coming.
Getting a mortgage, including a VA home loan, often comes down to "you don't know what you don't know." And in such a technical field as mortgage lending, what you don't know is often quite a lot.
And that's why important not to just go with the first VA home loan lender you find. Take time to shop around for someone who understands you and the VA home loan process.
What questions should you ask when looking for the perfect lender match? Here are some suggestions.
What is your loan officer's experience with the VA loan?
You're not just looking for the dollar amount they've processed, but their number of closed transactions per year. If your loan officer is just starting out in the business, inquire as to their branch manager or trainer's numbers.
What is your average "clear to close" time frame?
This is the amount of time it takes from the day they ratify a sales contract to the day the sign the papers making the home theirs. A good time frame is between 25 and 30 days. Ask about your lender's track record, and if a closing is missed, who is going to ensure that your rate lock doesn't expire. Pro tip: smaller lenders usually have much quicker turnaround time.
What is the interest rate? The APR?
The interest rate and APR should be fairly close to each other. The interest rate is typically the first number advertised, upon which the total amount of money borrowed will be compounded. The APR, on the other hand, is the true cost of borrowing the money, and includes things such as points, origination fees, underwriting fees, etc. If the APR is quite a bit higher than the interest rate, ask to have that explained to you in detail.
Understand Section A fees.
This cannot be overstated. Often buyers say, "oh, the seller is paying the closing costs, so my loan officer told me not to worry about it." But that can be deceptive, thanks to a series of costs leveraged on VA home loans known as "Section A fees." They can include an origination fee, processing fee or underwriting fee. If you weren't paying them, you could use the seller's money to do other things, like prepay homeowner association dues, or buy down to a lower interest rate -- things that work for your financial health, and not the lender's.
The Section A fees, which can be as high as 1% of the purchase price under VA regulations, are not required and are often negotiable. Your loan officer should sit down and walk you through every single line item on your official loan estimate, line for line, and you should feel comfortable with all of it.
Do I know who my processor and underwriter are?
In larger lending institutions and banks, the processor and underwriter are often the bottleneck.
In a smaller "local" lender, there is typically one dedicated processor and one or two dedicated underwriters who can be called upon at any time to answer questions -- both before the file even makes it to them, and long after.
That ease of communication goes a long way in overcoming potential snags in the beginning, as well as at closing time. If your loan has to go to another "department" with an unknown recipient, you may or may not make a tight closing window.
What is the lender's availability to you as a client?
This should be a top question asked when shopping around for a loan.
Typically, people shop for homes on nights and weekends, when they're not out earning money to pay for the purchase. A great lender will be accessible via cell phone, text, Facebook messenger or Bat Signal -- any means necessary to make sure that, when you are ready to write an offer on a home, you are fully supported.
That availability will mean the lender can get an updated pre-approval letter in your realtor's hands, and call the listing agent to tell them that your offer is financially solid. It also means that your loan officer should have already asked for and received your supporting documentation to take you one step further from a pre-qualification and have a full pre-approval.
There are many things that can make or break a loan, but the quality of your lender doesn't have to be one of them. Shopping around and partnering with a loan officer who educates you and is proactive will put you light years ahead of the crowd!
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