To ensure the successful approval of your VA loan by a mortgage lender, It’s important that you understand all the important steps in the approval process. The following are some of the major steps that you will need to handle during VA underwriting:
Evidence of your income — this means your latest two pay stubs and documentation related to monthly income such as interest income, rental income (the underwriters will probably only count 75% of this), alimony, and so on. Remember to collect the documents that confirm these numbers. Add them all up and be prepared to state what you bring home each month before anything is taken out. Your loan officer is likely to tweak these numbers depending upon what the underwriter is likely to say or do.
Evidence of your costs — this means your credit report. Go online and download your credit report including your score. Add up all the monthly payments that are stated, reduce the number by those debts that have been eliminated or reduced (don’t forget to keep the receipt for the payoff), and state the number of dollars that are paid out each month. A critical need will be to also segregate out of the costs your rent, home owner fees, homeowners/renters insurance, real estate taxes, mortgage insurance, first mortgage, second mortgage and any other financing payments or fees.
Just like the income numbers above, your loan officer is likely to tweak these numbers depending upon what the underwriter is likely to say or do.
Certificate of Eligibility — we call this your “COE” and you need to fill out a VA Form 26-1880 and submit it to your VA eligibility center along with your DD 214 or other acceptable proof of service. Here is where you find the right stuff: http://www.homeloans.va.gov/eligibility.htm. Follow the instructions and acquire your COE right away.
Calculate the loan amount — what is the purchase price on the house or the refinance amount, or the purchase price plus the expected construction costs?
The four basic criteria for the underwriter to be able to close are as follows:
Certification — do you have a Certificate of Eligibility from the VA?
Character — is your credit score strong?
Collateral — is the house eligible for the loan? The VA is the best program for the widest range of possibilities on this question. You can buy a house, refinance a house, buy and remodel, construct new, bring in a prefab house onto raw land (manufactured) or actually roll your house onto your property (mobile).
Capacity — do you have enough income each month to pay the monthly payments including mortgage, insurance, taxes, utilities, home owner fees, etc and still have 59% or more of your gross income available for other stuff?
There will be more information required but you probably have it memorized (such as your social security number). Your loan officer will organize the information, collect the documents, and compose the single most important document for your loan, the formal application on Form 1003. It is the keystone to entire VA loan approval process.