Who are the best VA home loan lenders? That is a question that is hard to answer because not all borrowers have the same needs. You will want to tailor your search for a participating VA lender to suit your specific goals and plans for the home.
That is important because there is no one-size-fits-all home loan solution for ANY type of mortgage. You might want to purchase a condo unit, a typical suburban home, or a mobile home. Or you might want to build a house from the ground up using a VA One-Time Close construction loan, also known as a single-close construction loan.
In each case, there are different types of loans that have different rules. The condo loan rules are not the same as the construction loan rules for obvious reasons. One loan is for an already-constructed property, the other is for one that doesn’t exist yet. And those are only two of the basic differences between home loans.
In spite of all that, it’s actually easier to find the best VA loan lender than you might think. Why? Because of some common sense guidelines that will help you find the right VA lender and home loan for you.
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Who Offers VA Mortgage Loans?
There are many VA loan lenders. Some of the most highly visible among them include, but may not be limited to the following list. What follows is NOT an endorsement of any individual lender:
- USAA Bank
- Navy Federal Credit Union
- Pentagon Federal Credit Union
- Veterans United Home Loans
- Veterans First Mortgage
- Quicken Loans
- PrimeLending
- LendingTree
Some companies, including Veterans United Home Loans, have either employed or partnered with ex-military members to help educate people on the value of owning a home, how to successfully apply for a mortgage loan, etc. Some companies may also offer credit counseling services and other programs to further assist future VA loan borrowers.
The company USAA has a different approach; this financial institution is specifically made to serve those seeking VA mortgages and other military-friendly financial services. VA home loans are said to make up more than 60% of the USAA mortgage portfolio, and this is a mortgage loan company that is not open to the general public outside of the military community.
Still other companies offer credit union services including VA, FHA, and conventional mortgages. One such company, Navy Federal Credit Union, offers something called Freedom Lock, which is essentially a mortgage loan interest rate lock commitment you can negotiate with a lender.
But while Freedom Lock is a fancy name for a typical interest rate agreement, the company’s Real Match Guarantee option isn’t so typical. This guarantee, when offered, means Navy Federal Credit Union will match an interest rate option offered by a competing lender.
That is a good example of the kind of home loan option you could find if you shop around for a VA mortgage lender long enough. Not all lenders offer the same advantages to a veteran borrower, which is why it pays to review many lenders.
How To Choose The Best VA Lender
There are many things to remember when trying to choose the best VA lender. The first is to keep in mind that not all lenders offer the same VA mortgage loans. For example, some housing markets don’t have a lot of demand for mobile homes, while others have a large inventory of mobile homes for sale and a high demand.
A lender who doesn’t see the value of offering VA mobile homes or manufactured home loans may not offer them. Some housing markets don’t support construction loans, and others don’t support VA loans to buy condo units–the inventory simply isn’t there.
You will need to ask some basic questions of each lender you review. What kind of questions? Use these as a jumping off point–you will think of plenty of follow-up questions to ask based on the answers you get to these:
- How many VA mortgages do you process compared to other types of loans like an FHA mortgage, USDA, conventional, etc?
- I am interested in a specific type of property (condo, mobile home, farm residence, construction loan to build on own land), do you have a loan that supports that under the VA mortgage program?
- What terms and conditions apply to my type of home loan compared to other types of VA loans?
- I qualify for zero down. Do you offer any incentives for making a down payment if I choose to do so?
- My credit score may disqualify me for zero money down; what can I do to reduce my out-of-pocket expenses with this type of VA mortgage?
The first question is critical in some cases; a lender who isn’t used to processing VA mortgages may not know some essential things that are crucial to getting your loan properly approved. What do you AND your lender need to know about VA mortgages for the best deal?
- Your lender is responsible for helping you get your VA Certificate of Eligibility for the loan, if required.
- Your lender is required to determine if you are exempt from paying the VA loan funding fee in cases where the applicant receives or is eligible to receive VA compensation for service-connected medical issues.
- Your lender cannot charge you a penalty for early payoff of the loan.
- You cannot receive excess cash back at closing time for things not considered bona fide refunds.
What Makes A Good VA Lender?
What makes a company worth your time as a potential mortgage lender? Financial institutions with plenty of experience in processing VA loans, for a start, are better than those that lack experience. A loan officer who isn’t familiar with VA lending practices may not fully understand their rights and responsibilities to help you, the applicant, obtain your VA COE, determine your exemption from having to pay VA loan funding fees where applicable, knowing how the zero-down aspects of the VA mortgage loan program work, etc.
You should consider lenders who provide step-by-step instructions to navigate the loan pre-approval process, the actual application, loan closing, etc.
A good VA lender can clearly explain your closing costs, down payment requirement where applicable (yes, a down payment can sometimes be required with a VA mortgage depending on circumstances, but most VA loans will feature a no-down payment option). Can your lender coherently explain how the VA loan funding fee works?
Why is that fee required? And does the lender know what it takes to lower that fee? The VA loan funding fee can be reduced by making a down payment and it is in some borrowers’ best interest to make such a down payment depending on financial needs and goals. If your lender doesn’t know about that, it may not be a sign you are dealing with a bad lender, but it’s a good excuse to keep shopping around.
Things To Keep In Mind About VA Loans
VA mortgages are unique in a variety of ways. If your loan officer doesn’t know some of these basic VA loan features, you may wish to keep looking for the best VA lender:
- VA mortgages have no VA-required private mortgage insurance or mortgage insurance premiums.
- VA mortgages technically have no VA-mandated conforming loan limit; prior to 2020 VA loan limits were calculated using Fannie and Freddie conforming loan limits. Jumbo VA mortgages are possible, but lenders will negotiate the loan limit and other details. Jumbo VA mortgages may require money up front similar to a down payment depending on the price of the home and other factors.
- VA mortgages have an escape clause that prevents the borrower from being forced to complete a transaction where the appraised value of the home is lower than the sale price.
- VA mortgages will require a down payment in cases where the borrower chooses to buy a home in the above scenario where the VA appraisal is lower than the asking price. The difference must be made up in cash by the borrower and cannot be financed.
- If you have a VA rated disability and are eligible to apply for an exemption to the VA loan funding fee, you will need to apply for the exemption–it is NOT automatic. Your loan officer should be able to help you do this.
- VA mortgage loans are assumable but loan assumptions require the lender’s participation.
- VA loans can be made out to multiple borrowers obligated on the note, but the VA will only cover the veteran’s portion of the loan. Non-veterans are not covered by the VA loan guaranty and the VA loan guaranty applies only to the military borrower’s financial share of the mortgage.
What You Can Use A VA Mortgage To Do
Your lender should know that VA mortgages CANNOT be used to purchase investment property you don’t intend to live in as your full-time residence. VA loans can be used to:
- Buy a single-family home
- Buy a home with up to 4 units
- Buy a condo unit
- Simultaneously buy and improve a house
- Buy a lot and manufactured home to put on it
- Build a home from the ground up
Talk to multiple VA lenders for best results. You will always do better shopping around for the best lender.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
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