Many buyers now apply for a mortgage online, and it’s easy to see why. You can start from your couch, any time of day. But one missing pay stub or overlooked rule can stall your loan for days, and a slow approval can cost you the home you wanted.
Veterans have more to consider. VA loans offer notable perks, but they come with their own rules. A little preparation can improve your chances for approval and help you get better terms. Here are five things to know before you apply.
1. Understand your loan options
“The best home loan is the one that best supports your financial goals, not just the one you qualify for,” says Chris Birk, the vice president of mortgage insights at Veterans United.
Here are the main loan types to compare:
- VA loan: With the Department of Veterans Affairs guaranteeing part of the loan, many eligible borrowers can buy with no down payment and no monthly mortgage insurance. The trade-off is a one-time VA funding fee.
- Conventional loan: The government doesn’t back this loan. Some programs allow as little as 3% down, but you’ll likely pay private mortgage insurance (PMI, a fee that protects the lender) if you put down less than 20%.
- FHA loan: The Federal Housing Administration insures this loan. You’ll need 3.5% down with a 580 or higher credit score, or 10% down with a 500 to 579 credit score, plus mortgage insurance.
- USDA loan (if you qualify): This loan requires no down payment. But it covers only homes in eligible rural areas and households earning up to 115% of the area median income.
“VA loans offer a unique set of advantages that
reflect the fact that this is a job benefit for those who’ve served our country,” Birk says.
But a VA loan isn’t suitable for everyone. It may not be the best fit if you’re eyeing a fixer-upper or a condo that lacks VA approval. The VA requires homes to meet safety and structural standards, and either one can stall your purchase. You may also run into sellers who prefer conventional or cash offers, since VA appraisals can require repairs before closing.
Tip: “If a veteran has substantial savings and excellent credit, it may be worth comparing the total cost of VA financing with a conventional loan,” Birk recommends.
2. Get your paperwork organized
“Having [your paperwork ready] can reduce delays and help the lender get a more accurate picture of your financial situation early,” Birk points out. “The goal is to avoid getting halfway through the process and discovering that a key piece of information is missing.”
Most lenders ask for the same home loan documents:
- Government-issued identification, like a driver’s license or passport
- Recent pay stubs to show what you earn
- W-2s or tax returns, usually from the past two years, to show your income history
- Bank statements for your checking, savings and retirement accounts to show what you’ve saved
- Employment information, like your employer’s name and contact details, to help the lender confirm your job
Going the VA route? You’ll also need a Certificate of Eligibility (COE), which shows lenders you meet the service requirements. Many lenders can request it electronically. If yours can’t, you may have to show proof of service yourself.
Veterans typically hand over a DD-214, the discharge paperwork. Active-duty members need a Statement of Service signed by a commander or personnel officer. If you get VA disability compensation, have your VA award letter handy as well.
3. Compare multiple lenders, not just rates
“You want to compare rates, costs, fees and service among multiple financial institutions,” Birk says. That’s because no two lenders price a loan the same way. Even with an identical credit score and down payment, one may quote you a higher rate or heavier fees than another.
Service can differ just as much. One loan officer might call you back within the hour and walk you through each step, while another goes quiet as your closing date gets closer.
Look for a lender that regularly works with military borrowers. VA loans have their own rules, from property standards to limits on what lenders can charge you. “Experience with those details can be important, especially when a borrower has a more complicated financial situation,” notes Birk.
To compare offers, start with the annual percentage rate (APR), which includes fees in addition to the interest rate, but don’t stop there.
Check the closing costs and lender fees on each Loan Estimate, the standard form every lender must send you after you apply. Ask how long the lender takes to close and read independent customer reviews. “A slightly lower advertised rate doesn’t necessarily mean you’re getting the best overall deal,” Birk emphasizes.
4. Learn how online mortgage preapproval works
A mortgage preapproval is a letter from a lender stating how much it’s willing to lend you, and you can often start one online. “Instead of guessing what you might be able to afford, you’re working with an estimate based on a lender’s review of your financial information,” Birk says.
Lenders typically look at five things:
- Credit history: This shows how you’ve handled borrowing in the past, such as whether you pay your bills on time.
- Income: This is the money you bring in each month, like your paycheck, military pay or VA disability benefits.
- Job history: Lenders usually want to see a steady work record over the past two years.
- Assets: These are the savings you can tap for your down payment and closing costs, like money in checking, savings and retirement accounts.
- Existing debts: These are the payments you already owe each month, like car loans, student loans and credit cards.
Getting preapproved before you tour homes gives you a realistic budget, so you don’t fall for a house you can’t afford. “A preapproval letter can also help demonstrate to sellers that you’re a serious buyer who has what it takes to get to closing day,” Birk says. Some sellers and listing agents won’t consider a buyer without one.
5. Check your credit and finances
The VA doesn’t set a minimum required credit score. But individual lenders still set their own requirements, and many want to see at least a 620. Aim higher if you can — a better score usually brings a lower interest rate, and that saves you money over the life of a loan.
Your score isn’t the whole picture, though. Lenders also weigh two other things:
- Debt-to-income (DTI) ratio: Your DTI is the percentage of your gross monthly income that goes toward debt payments. For VA loans, 41% is a common benchmark, but you may qualify with a higher DTI if you have enough income left over after paying your monthly expenses.
- Savings and reserves: Reserves are the money you have left after closing that you can use to cover your mortgage payments. “Even if you’re using a VA loan and don’t need a down payment, having money in the bank matters,” says Birk.
Tip: “Consider using a free credit monitoring tool to stay on top of your credit profile over time,” Birk suggests. If you see errors, dispute them with the credit bureau, since errors can lower your score and raise your rate. Paying down your credit card balances can also boost your score and shrink your monthly debt payments.
Benefits of applying for a mortgage online
Homebuyers balancing work, family and a move may find a few advantages in going digital:
- Convenience: “Borrowers no longer necessarily have to work around traditional business hours just to get an application started,” Birk says. You can start your application from home and get support online or by phone.
- Real-time updates: Many lenders let you check your loan status online and message your loan team. “That can make communication easier and help eliminate some of the back-and-forth that could slow things down,” adds Birk.
- Faster progress: “Digital tools can help lenders collect and review information more efficiently, which may support faster preapproval timelines,” Birk notes.
Common mistakes veterans make when applying online
Three missteps often trip up veteran homebuyers, but you can avoid them:
- Overlooking the funding fee details: The VA funding fee is a one-time cost, but veterans who receive VA disability compensation, along with some others, don’t pay it. Check your COE to see whether you owe it.
- Taking on new debt before you close: A new car loan or credit card can change your debt-to-income ratio and derail your approval. “Make payments on time, keep an eye on your debt balances and avoid taking on unnecessary new obligations while you’re preparing to buy,” Birk advises.
- Borrowing the maximum you’re approved for: “Preapproval should be a starting point for making a smart financial decision, not an invitation to stretch your budget to its limit,” says Birk. Plan for taxes, insurance and repairs, too, and pick a payment you can live with.
Online mortgage application red flags
Any of these is reason enough to look at other lenders:
- Pressure to commit right away: You’re not committed to a lender until you sign final loan documents. Don’t let a loan officer rush you with deadlines or demands for payment before you’ve compared offers.
- Unclear fee disclosures: Your lender has to send a Loan Estimate within three business days of your application. It should list your closing costs, including origination charges. If you can’t find the fees or the form shows up late, press the lender for answers before you go further.
- Unrealistically low advertised rates: “Be cautious about promises that sound too good to be true,” Birk advises. That includes ultra-low advertised rates, which may assume a high credit score or a big down payment.
How veterans can choose the right online mortgage lender
Once you’ve narrowed your list, these moves can help you pick the right lender:
- Test their communication. Call or email with a question before you apply, and notice how quickly and clearly someone answers.
- Ask VA-specific questions. Can the lender pull your COE? Do you owe a funding fee? How long will the VA appraisal take?
- Try the online experience. “Look for a lender that offers a secure online application, a straightforward way to upload documents and connect financial accounts and clear visibility into where your loan stands throughout the process,” advises Birk.
Frequently asked questions
Can veterans apply for a VA loan entirely online?
Veterans can complete most of a VA loan application online, including requesting a COE, uploading documents and tracking progress. You’ll likely still speak with a loan officer at some point, though. Whether you can sign closing documents remotely depends on your state and lender.
Is it safe to apply for a mortgage online?
Applying for a mortgage online is generally safe, since lenders must follow federal rules to protect your personal data. Still, you’ll share sensitive details like your Social Security number and bank statements, so confirm the lender is reputable first.
How many mortgage lenders should I compare before applying?
The Consumer Financial Protection Bureau recommends weighing at least three mortgage lenders before applying. Each extra quote can help you find a better deal.
This article originally appeared on USA TODAY: 5 things veterans should know before applying for a mortgage online
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