How to Use a VA Loan to Assume a House Loan

By Don Rafner

If you've served or are serving in the military, you may qualify for a home loan from the U.S. Department of Veteran Affairs (VA). These loans come with significant advantages, the most important of which is that eligible buyers can purchase a home without having to come up with a down payment. To qualify for a VA loan, you'll have to prove to your mortgage lender that you did serve or are serving in the military.

Build a case for your lender that your gross monthly income is high enough to support your new mortgage payments. Your lender will want your monthly debt obligations, including your new mortgage loan payments, to be no more than 36 percent of your gross monthly income. Make copies of your last two federal income tax returns, paychecks from the last two months, credit card statements, other loan statements and savings and checking account statements.

Obtain your Certificate of Eligibility from the U.S. Department of Veterans Affairs. This is the certificate that you'll send to your lender to prove that you did serve or are serving in the military. You can obtain the form online through the department (see References) and mail it to the department's Winston-Salem Eligibility Center. You can also request that your lender obtain the certificate for you.

Call a mortgage lender and explain that you are interested in applying for a VA loan. The Department of Veterans Affairs insures VA loans, but does not originate them. That task is left for lenders and banks. A lender will ask for your Social Security Number, address of the property you are interested in buying and the amount of your gross monthly income.

Give your lender permission to run a credit check on you. The higher your three-digit credit score, the more attractive of a borrower you are. If your credit score is 740 or above, you'll qualify for the lowest interest rates. If it's under 620, you might not qualify for a VA loan at all.

Send your lender your Certificate of Eligibility and the copies you made in Step 1.

Agree to a closing date if your lender approves your application. At the closing table, you'll sign the paperwork that makes your VA-insured loan official. You'll also pay all closing costs and fees that are due.

Make sure to shop around for the right mortgage lender, as origination and loan-closing fees can vary widely. According to Bankrate's 2009 survey of national closing costs, the average origination fees and closing costs on a $200,000 home loan stood at $2,732.

http://www.lenderva.com