VA loans offer specific advantages that conventional loans simply can't match. Of course, the main ingredient is not requiring a down payment, without a doubt the feature with the most impact. Yet while there is no down payment needed, interest rates are still very competitive when compared to other low down payment programs. You can get a low down payment conventional mortgage that asks for a 5.00 percent down payment but the rate is adjusted upward to accommodate the perceived increase in risk. And as a bonus, there is no monthly mortgage insurance that conventional must have with a down payment that is less than 20 percent of the sales price. Once you've determined that you are in fact eligible for a VA loan, your next step is to find the ideal VA lender.
The first and foremost requirement when selecting a lender for your VA loan is the lender's status with the VA directly. Practically every single mortgage company offers the same suite of conventional mortgage loans, those underwritten to Fannie Mae and Freddie Mac guidelines. Those make for the lender's main mix of loan programs. At the same time, those very lenders can also offer a VA home loan as well.
But if the lender isn't approved by the VA, you should avoid that lender and find one that is VA approved. A VA approved lender understands the intricacies of the VA program and can shepherd your VA loan application through the approval process much easier. Approved VA lenders have the independent authority to not only accept your VA loan application but to order the appraisal, underwritten the loan according to VA standards and complete the entire process in-house without third party intervention.
Some lenders who may offer a VA loan merely take your loan application then forward the application to yet another lender who is in fact VA approved. VA loans are approved in a similar fashion as other loan programs but they do have their own guidelines that others don't have. When a loan officer accepts a VA loan application that isn't aware of all the VA rules that need to be followed, it's possible your application could be held up needlessly during the approval process or worse, turned down when the loan could have received an approval by using a VA lender.
Choosing the program
OK, now you know to only shop around with VA-approved mortgage lenders. Your next step in the process is to decide on which loan program you'll use when comparing different lenders. And this is a critical step.
There are multiple VA loans from which to choose with various choices from a 3/1 hybrid to a 15 year fixed or a 25 year fixed rate loan for starters. When getting rate quotes, you must stick to one program and not confuse the process by comparing a 15 year rate quote from one VA lender and a 30 year rate from yet another. Your job is to find the best combination of rates and fees using the very same standard.
VA lenders evaluate several factors when assigning an interest rate. Primarily, the variables include your credit score, your loan amount and how long you need the rate for and the lender's fees charged to the veteran. While the VA doesn't require a specific credit score, most lenders ask that your credit score be no lower than 640, 620 in some cases. If your credit score is above 720 you might get a better rate than someone with a score of 635.
Lower loan amounts may also have a slightly higher rate compared to larger ones as well. And finally, the longer you need the interest rate, your lock period, the higher your rate may be. Oh and one more thing, because rates can vary from day to day and even intra-day, make sure you get your rate quotes on the same day around the same time. Don't rely on rate quotes on websites or advertisements; you need real, live quotes to reflect the current market.
When calling, your question will be something like this:
"I need your quote for a 30-year fixed rate loan of $150,000 with no points. My credit is excellent and we're closing within 30 days and please include your allowable VA fees."
By getting rate quotes from VA approved lenders in this fashion, you're truly comparing apples to apples and providing each lender with a fair opportunity to provide you their best effort.