When shopping around for rates on VA home loans you’ll first shop around for the ideal VA lender. And if this is the first time to buy and finance a home you’ll undoubtedly have your fair share of questions. Yet “first timers” and even those buying their next home there will be some things you may not even know to ask. That’s certainly within reason as the VA loan approval process involves quite a bit of paperwork, time and talent. There are some obvious questions to ask such as “what are your rates” and you certainly need to know the answer to that question but here are some others you need to know the answers to.
Are You a Broker or Banker? There are two primary types of mortgage companies today, a mortgage broker and a mortgage banker. A mortgage broker is an entity that arranges financing between a borrower and a lender. The broker doesn’t issue the loan approval nor provide any of their own funds. There are companies called “mortgage wholesalers” who use mortgage brokers to find loans for them. Brokers obtain below market pricing then “mark up” their rates to retail level. The idea behind mortgage brokering is having the mortgage broker shop around for the best deal.
Can brokers actually find the best deal? Maybe, but you’ll soon find that rates from brokers are similar to rates elsewhere. Yet a mortgage banker has additional advantages with the primary one having control over the lending process. With a mortgage banker you’re working directly with the lender who makes the final decision from loan application to final funding. There is no “hand off” from one business to another with a direct lender.
Are You LAPP Approved? LAPP is the acronym for Lender Appraisal Processing System and is a special status awarded by the VA to certain lenders approved to underwrite VA loans. Lenders who are approved to use LAPP streamline the loan process by expediting the appraisal report. This allows the lender to evaluate the appraisal, referred to by the VA as the Certificate of Reasonable Value, or CRV, without the VA being involved or otherwise approving the CRV independent of the VA lender. A lender that does not have LAPPP authority will require additional time to approve and close a VA loan.
What Are Your Closing Costs? At first glance this may appear to be an obvious question but when comparing different VA lenders it’s important to understand what costs the VA lender has control over and what they do not. VA lenders have control over their own fees and not the fees for other services needed to approve and fund a VA mortgage. When comparing closing costs, only compare the costs being charged by the lender, ignoring any third party fees which can cloud the comparison.
VA loans restrict the type of closing costs the veteran may pay and these include charges for an appraisal report, title insurance and related fees, a credit report, origination, recording and survey or abstract charges. In addition to comparing interest rates, compare the fees required as well. One lender may be slightly higher in rate but have much higher closing costs, erasing any advantage the lower rate may provide.
Are You VA Approved and Are You Non-Supervised? This question might surprise the person you’re talking to. Few outside of the VA mortgage industry know what this means. First, the VA approves certain lenders who can originate, process and underwrite a VA loan. Lenders that are not VA approved can still originate a VA loan yet will send the loan to a VA approved lender, much like a broker would do. Non-supervised status however are in the upper tier of approved VA lenders and have met specific criteria including minimum credit lines, net worth and a vetting of the underwriting department.
How Long Will It Take to Close My Loan? This can be a moving target depending upon the lender’s current workload but there needs to be plenty of time to not only approve the loan but get your loan papers for you to review prior to your close. Most sales contracts will allow for a 30 day close so the VA lender needs to be able to close your loan well within that time frame. Mistakes can always be made in any process and time needs to be allotted to account for bumps along the road. Not many bumps, mind you, but prudence pays.
What Should I Avoid While My Loan is Processed? When speaking with your loan officer and getting instructions about the things you need to provide and you’ll also be advised about what not to do. Or at least your loan officer should tell you without having to ask. The most important thing you can do is nothing. That’s right. Once you submit your loan application and requested documentation simply sit tight. Don’t change jobs. Don’t apply for credit elsewhere. Don’t go on a two week holiday. What you should avoid while your loan is approved is anything different than what you’re doing now.
These are just a few of the questions you’ll ask your lender and as the loan process moves further along you’ll have even more. Just keep in mind when speaking with your prospective lender you include these six questions. When a lender passes all six tests, you’ve found the ideal mortgage company.