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Using a Veteran Loan to buy a home is not complicated or rocket science. Better said, the home buying process using a veteran loan is basically the same as with a conventional Fannie Mae or Freddie Mac mortgage with one notable exception.

Here are my 6 steps to buying a home using a veteran loan versus a conventional mortgage.

1. Go to a few different VA Loan lenders and apply for a VA loan with them. This will help you compare fees and rates which will help keep everyone honest. This part of the process is known, in the mortgage and real estate worlds, as getting pre-approved.

   This is where the notable exception comes into play, and I think this is a significant difference to VA loan qualification requirements versus conventional Fannie Mae and Freddie Mac requirements. The veteran loan requires the consideration of residual income (money left over at the end of the month after the bills and mortgage payment are made) and the “monthly estimate maintenance & utilities of the home.” For the veteran loan, the residual provides a calculated way to arrive at a expense to income cushion so to speak. This cushion can be loosely characterized as the room left over at the end of the month between the applicant’s gross monthly income and after all the expenses including an estimate of utilities are considered.

   The second aspect of this notable exception is the consideration of the “monthly estimate maintenance & utilities of the home.” No other loan program considers these expenses in the loan qualification. Rather they are dismissed by Fannie Mae and Freddie Mac. I personally think it is a great idea to consider these real expenses as they can add up and cause financial trouble if not paid attention to by the loan applicant.

2. Once you know what sort of loan you will qualify for with your veteran loan, you should find a real estate agent and start looking for homes that fit into your price range.
3. Once you find a home you want, you will need to make an offer on it. Your real estate agent will help you write and present your offer. Make sure that your realtor explains to you what are your options, or contingencies, if there are problems with the home that are only discovered after the sales contract is signed during the inspection period.

   Contingencies are very important in any real estate sales offer. You will need to have your agent spell out what happens if the home doesn’t appraise or if there are physical problems with the home that are found during the home inspection period that typically follows an approved sales contract. A good realtor will know what the market will allow for when it comes to negotiating contingencies.

4. If the seller accepts your sales contract offer, you will then have to have the home appraised by a VA approved appraiser. The VA will assign the appraiser to do the appraisal which the process of will be initiated by your VA lender.
5. Once the appraisal is complete, you will need to compare the appraised value to the sale price you agreed on. If it matches or is above that, then you should continue with completing your mortgage qualification. If the appraised value is less than your sale price, you will need to negotiate some form of contingency with the seller.
6. Once your application has been approved, you will close the deal and receive the keys to your new home.

If you finish these steps then congratulations, you’re a homeowner!