If you’re ready to buy a home with a VA loan or refinance an existing VA mortgage, you need to find a VA lender with competitive rates, terms, and experience to close your VA loan. VA loans are approved in a similar manner as loans underwritten to conventional guidelines issued by Fannie Mae or Freddie Mac and government-backed programs FHA and USDA. However, VA loans do have a few “quirks” that can stall your VA loan application if your VA lender isn’t all that familiar with the VA mortgage process.
For example, you still need to have a minimum credit score of 600 in most cases, be able to afford your new mortgage payment as represented by your debt-to-income ratios and occupy the property as your primary residence.
Yet VA mortgages have a few unique requirements and procedures, which means the loan approval process will be a bit different. For example, VA loans require you to have specific “residual funds” based upon household size and the location of your property, whereas conventional and FHA loans have no such requirement. VA loans have a specific funding fee that will vary based upon a number of factors.
If you work with a VA lender not entirely familiar with the VA process, it’s quite possible your loan could be delayed or even declined. How do you find a great VA approved lender?
A great VA approved lender is one with years of experience in processing and approving VA loans. How do you know how long a lender has been in business? You simply ask them as part of your interviewing process.
A great VA approved lender is dedicated to VA lending. Almost all mortgage companies originate all types of mortgage loans, from USDA loans to conventional ones and everything in between. A great VA lender concentrates almost entirely on the VA loan program.
National and regional banks and mortgage lenders should have a specific VA lending division with loan officers who work with solely with eligible VA borrowers.
What makes a good VA lender great is the individual talent the VA lender employs. You want a professional loan officer with significant experience in handling VA loans. Such a loan officer will know the specific steps and VA loan qualification requirements by memory.
LAPP stands for Lender Appraisal Processing Program and is a special status awarded to qualified VA lenders. Historically, VA loans required an appraisal of the subject property to be ordered by and managed by the Department of Veterans Affairs. This process was largely criticized both due to the quality of an appraisal as well as the length of time it took for a VA-ordered appraisal to work its way through the appraisal process then ultimately to a lender.
The VA later established a system in which an authorized VA lender can order the appraisal and underwrite it without specific VA approval. This is a special authority issued only to qualified VA lenders. Ask your potential lender if they are LAPP-approved.
Beyond LAPP approval, lenders may also apply for and receive a special “Automatic Non-Supervised Lender” status. This authorization is only issued to individual approved VA lenders who have met the experience and fiduciary requirements required to receive this designation.
A Non-Supervised Lender has the full authority to evaluate, approve and fund VA mortgage loans on his/her own without having to engage the VA directly. A great approved VA lender has applied for and received the right to become a Non-Supervised Lender.
Third Party Originators
When you apply for a VA loan at a mortgage company that is not a VA approved lender, you’re working with what is termed a “third party originator” or TPO. A TPO has the ability to accept a VA loan application but is not itself a VA approved lender.
Even though a third party originator can accept a VA loan application as well as quote VA mortgage rates on behalf of approved VA lenders, they’re not the same. If you speak with a loan officer from a lender that is not VA approved, you run the risk of having your loan declined or not approved in a timely manner. There are too many great VA approved lenders in the industry for you to work with someone that is not directly involved in getting your VA approval.
A great VA approved lender is a mortgage company that is dedicated to VA loans, hires loan officers who specialize in VA loans, and underwrite and approve VA loans on their own, all with years of experience in the VA mortgage environment.
When you find a VA approved lender with all these credentials, you’ve just found a great VA lender.