VA Loan Pre-Qualification
VA loan pre-qualification is one of the first steps to take if you’re a veteran or military member ready to buy a home in Miami or another site of EE.UU. But, like many, if you’ve been dreaming of owning a home, chances are you have already done a bit of “fantasy” home shopping online. And, you may have noticed that, in many cases, mortgage payments on a home can be less than what you’ve been paying for rent. While online mortgage calculators may be a place for a first time home buyer to start figuring out how much of a home they can afford, it is important to remember that the figures online are not necessarily an accurate measure of what is possible for you.
Why Get Prequalified in Miami?
By going through prequalification, buyers can identify and start working on potential financing or VA eligibility roadblocks in Miami. Does your credit score fall a bit short? Is your income likely to be a problem?
Prequalification is the time to isolate and start addressing these issues.
Once you’ve been prequalified for a VA home loan, the next step is loan preapproval.
The Goals of Prequalification in Miami
You can think about loan prequalification as a “first interview” of sorts. Prequalification helps lenders in Miami achieve three main goals:
- Assess a borrower’s service and credit eligibility
- Estimate the loan amount a borrower may obtain
- Begin gathering documentation needed for preapproval and loan underwriting
The prequalification process also holds key benefits for prospective borrowers in Miami. It’s a non-binding step you can take with multiple lenders, which will help you compare rates and terms. It’s typically a 10-minute conversation.
What to Expect
Along with checking your credit, lenders in Miami will also seek to learn more about your employment, your income and your overall financial and home buying goals.
Different lenders may take different approaches to the prequalification conversation. But it’s common for loan originators to ask you about:
- Your desired loan amount
- Your current and previous employment
- Your gross (pre-tax) monthly income
- Your assets, like bank accounts and retirement funds
- Your monthly liabilities, like day-care costs, child support or alimony
- Any previous bankruptcies, foreclosures or judgments
- Any delinquencies or default on federal debts like student loans
- Whether you’ve recently owned a home
The Credit Check
With your permission, lenders in Miami conduct what’s known as a “hard inquiry” to obtain your current credit scores. A hard inquiry can ding your credit score, although it’s typically only a few points if any. When you’re shopping for a mortgage, the credit bureaus won’t count every hard inquiry against you. Instead, they’ll typically consider all lender inquiries within a 45-day period as one single check, which minimizes any harm to your credit and allows you to comparison shop.
The VA doesn’t have a built-in credit score to be eligible for this program. But it’s important to remember the VA doesn’t make home loans. Instead, it basically provides a form of insurance on behalf of qualified borrowers. It’s ultimately up to lenders like Veterans United to decide whether to make a home loan.
Because lenders take on most of the risk with each loan, they’re allowed to introduce requirements and standards that go beyond what the VA wants to see. You’ll often hear these additional requirements called “overlays.” A credit score cutoff is among the most common.
Different lenders in Miami can have different credit score requirements. You may also need a higher score if you’ve experienced a recent bankruptcy or foreclosure or if you’re seeking a jumbo loan. Generally, a 620 FICO score is a pretty good barometer for VA lenders.
Any co-borrowers on the loan would also need to meet the lender’s credit score requirement. If you’re purchasing in one of the nation’s nine community property states, lenders can consider your spouse’s credit and debts even if he or she won’t be on the loan.
What Else Are Lenders Looking For in Miami?
Lenders in Miami will also get a good look at your major monthly debts from your credit reports. They’ll use those and the income information you provide to calculate an initial debt-to-income (DTI) ratio. For VA loans, this key mortgage industry metric looks at your monthly debts in relation to your overall monthly income.
They’ll calculate this figure based in part on the loan amount you’re seeking. And that means flexibility can be important for prospective borrowers whose DTI ratio is on the edge. Depending on the lender’s requirements and your unique situation, you may need to seek a lower loan amount to get a workable debt-to-income ratio.
The VA typically wants to see a DTI ratio of 41 percent or less. But it’s possible to go above that and still secure financing. Lenders will usually have their own maximum allowable DTI ratio. We’ll take a closer look at DTI ratio in the next lesson.
Low credit and high DTI ratio are two of the most common reasons why some prospective buyers are unable to get prequalified.
If Your Credit Scores Fall Short
So what happens if you don’t meet a lender’s credit score cutoff? Some lenders may simply send you packing if you fail to meet their credit score requirement. Veterans United takes a different approach.
We created an entire department dedicated to helping service members, veterans and military families improve their credit and get on the path to VA loan pre-qualification.
If we’re not able to prequalify borrowers, they have the opportunity to work with the credit experts. Their consultants:
- Identify and help you correct errors on your credit report
- Establish a plan to strengthen your overall financial profile
- Develop personalized objectives to reduce debt
This is a free service open only to veterans, service members and military families. The Program has helped more than 6,000 veterans and service members overcome their credit challenges and go on to close on a home loan.
VA loan pre-qualification Miami
Why should I go through a pre-qualification process?
Pre-qualification for a VA loan is recommended for all eligible borrowers before they start shopping for a house in Miami or around EE.UU. The pre-qualifying process provides potential borrowers with an estimate of how much monthly mortgage payment they can afford. Having a price range for house hunting can narrow down the prospects and save you time. There’s no sense in looking at a home you can’t afford.
In general, VA home loan pre-qualifying requires some documentation in Miami
- You should look for a loan professional, and gather the follow information and documentation:
- Income and credit history.
- Credit report.
- Certificate of Eligibility (COE).
- Tax returns.
- Any information that checks up your income.
Process guarantee a VA loan?
Pre-qualification doesn’t guarantee that you will actually qualify for a VA loan, but it does give you an idea of how much you can borrow if you do end up being approved. It can also help you identify potential problems with your credit or income before you commit to the actual VA loan application process. The only way to know if you qualify for sure is to apply for the loan and go through the VA mortgage underwriting process.
What to do after you get pre-qualified?
After you are pre-qualified for a VA loan you will know the exact amount you’re eligible for on your VA home loan, and also you can begin searching for homes as a potential buyer. You’ll know in advance exactly what you can afford and what is outside your price range. You will receive a pre-approval letter from your Lender. The letter indicates to sellers and real estate agents that you’re a serious buyer who can handle the financial commitment of a mortgage. It’s the kind of security you’ll be grateful for as you search for the best value for your money. This way you avoid wasting time with the property that’s out of your price range or sellers who are unsure.
What happens if I don’t pre-qualify?
The VA loan pre-qualifications goals are to help you to build your credit eligibility, gather your documentation and estimate the loan amount you can obtain, so in the case you don’t pre-qualify the financial information you get through this process will help you to organize you and correct your financial profile, reducing your debts. You can communicate with a credit expert who will help you with this task. And finally get on the path to VA loan pre-qualification.