It’s not really news any longer than automation has changed pretty much most every aspect of our daily lives. From the fancy options in our new automobiles to social media interaction to how we acquire and read books, most everything is automated and VA home loans are certainly no exception. VA loans are approved electronically and the process has changed dramatically over the years. Here are a few things that are different today compared to not long ago.
The VA Approval
It used to be that a veteran’s VA loan application was ultimately approved by the VA itself. In addition, the VA employed VA approved appraisers who would perform appraisals at the direct request of the VA. That’s why in the past some sellers were reluctant to accept an offer that was being financed with a VA loan because the approval process could take twice as long, or worse, compared to a conventional loan.
Today, VA approved lenders take the loan application from start to finish and approve the loan internally as well as order a VA appraisal from an appraisal management company. There is no need for any VA “assistance” to approve and fund a VA loan for a purchase or a refinance.
VA loan applications in today’s market are approved electronically using an automated underwriting system. In effect, the VA application is approved upfront then documented after an approval is issued, completely opposite how VA loans used to obtain an approval status.
A VA loan application is submitted to an automated underwriting system which reviews the credit scores and issues an approval within a matter of moments. The approval will list the items needed to complete the process and the VA lender simply collects the information the automated approval provided.
This automated process literally cuts weeks off of the approval.
The Credit Review
Let’s now look at how credit reports are handled. In the past, a VA lender would order a credit report from a credit reporting agency. The report would soon arrive within a few days. The report would then be included in the loan file and manually reviewed.
Line by line, the lender looked for late payments, loan balances for any negative information. If there was a payment that was made more than 30 days past the due date, the veteran would typically be required to hand write a note explaining why the payment was late. The explanation had to be reviewed and approved by the VA lender’s underwriter.
Today, the credit report is only reviewed if the automated underwriting system says so. There is no need to manually review a credit report, line item by line item. Instead, the credit report mostly relies on the credit score. If the credit score meets the lender’s minimum and there is only minor derogatory information on the report, there is no need for any explanation and the loan continues toward and approval.
In the past, a fully documented paper file would be hand delivered to an underwriter, the person responsible for making sure the VA application conforms to VA guidelines. One by one, page by page the underwriter would determine if the loan met the guidelines or not. If there were questions, the underwriter would contact the loan officer or loan processor for more information.
Today, the underwriter reviews a digital copy of the file that includes the items the automated approval requested. In this fashion, the underwriter determines whether or not the items provided meet the original automated approval.
Finding a Home to Buy
It used to be that a buyer would pore through the Sunday paper and look for houses while waiting for a real estate agent to enter a home in the multiple listing service. When a seller decided to sell, it might take one or two weeks before the notice of a sale was made available to other agents.
Now you can log onto most any real estate website and view listings as they are entered and search for homes based upon your own criteria. Instantly the homes that match your preferences are listed. You can also sign up to be instantly notified when a home is listed for sale to your email or mobile device.
Now Slow Down
When a VA loan can be approved in today’s environment in a matter of days compared to several weeks, it changes the process dramatically. Lenders can approve loans with less overhead, helping to keep rates and fees lower. There are fewer “fallouts” that occur. A fallout is a VA loan originally approved yet turned down at the underwriter’s desk. As long as the lender provided what the automated approval asked for in advance, the loan continues through the approval process.
However, that doesn’t mean you need to speed up. Technology changes how loans are approved but not your decision process. Take your time and evaluate your decision thoroughly. Don’t feel rushed and evaluate a potential purchase with a clear, calm mind.