9 Questions You Should Ask Before Choosing a VA Lender
Whether you're using your VA loan benefit for the first time or you've bought a home before, it's in your best interest to compare a few VA lenders rather than going with the first one you find.
This is because lenders—and the loans they offer—aren't all the same.
Even with VA loans, which are guaranteed (but not directly offered) by the government, details can vary between loans.
That's why it's important for veterans to know how to choose the best VA home loan lender. Working with the right lender could save you thousands of dollars and a lot of stress.
Check out some of the questions our experts recommend to help you narrow down the lenders on your list and choose the one that works best for your situation.
What Questions Should I Ask a Lender before Getting a VA Loan?
We'll go into more detail, but for your quick reference, we've listed the questions below:
Now, let's dive a little deeper into the why and how of these questions.
1. Are You a LAPP Lender?
In the mortgage world, there are many lenders that can do VA loans. However, not all lenders are able to close the loans themselves. Lenders that are approved by the VA to close loans within their company are called VA LAPP lenders.
So why does it matter to a borrower whether a lender has been through the VA Loan Appraisal Processing Program (LAPP)?
Well, since the lender won't have to deal with the extra processing required of non-LAPP lenders, you'll usually experience an expedited loan process, which means you'll likely close sooner and get in your home faster.
On top of that, to be LAPP-approved, the lender has to meet additional qualifications set by the VA. A lender must have an effective quality control system to ensure the best work on appraisal reviews.
Also, the lender exercises its LAPP authority through a staff appraisal reviewer (SAR), which is required to have at least three years of qualifying experience and a specified understanding of appraisals.
You can have confidence that LAPP lenders are often a better choice than other lenders.
2. How Many VA Loans Do You Typically Close per Month, and How Many Did You Close Last Month?
The VA loan process is a little more complex than the normal mortgage process. There are specific steps and requirements that the lender must be familiar with to efficiently close a VA loan.
Some lenders offer VA loans but don't do them very often, which is not in your best interest. You'll want to look for lenders who are regularly doing this type of loan and can provide you with numbers to back it up.
When you speak with a loan officer, ask them about their personal loan experience. A good average monthly range to look for in an individual loan officer is somewhere between at least 5–15 loans, with more being even better. You can also ask them how their number has changed over the last year or so to get a broader picture of their experience.
Keep in mind that if you're speaking to a newer loan officer or the mortgage market hasn't been doing too well, a loan officer may not have a large number to give you. This doesn't necessarily mean you shouldn't go with that lender, however.
If this happens, you could ask the loan officer how many VA loans their company closes per month and what the numbers have been like over the last year to get a feel for how regularly the lender itself closes VA loans.
Overall, the goal of this question is to find out whether the loan officer and lender are regularly closing VA loans and know the loan type well.
3. What Rate and APR Can You Offer Me?
A common focus for VA lenders is mortgage rate, which is the percentage of the home loan cost the borrower is charged in interest. You'll want to ask what this number is.
Additionally, if you're considering an adjustable-rate mortgage, make sure to ask for further details. Ask how often rates will be adjusted, what the maximum rate is, and how much it can increase annually.
Rate is an important aspect of mortgages, but another aspect that is just as important (and sometimes overlooked) is annual percentage rate (APR).
APR is the percentage of the loan cost you pay overall for taking out a home loan, including charges like fees and closing costs. APR not only takes into account a number of fees that the rate doesn't, but it also includes the rate itself as part of the percentage.
To put it simply, if you ask a few lenders for their rates and compare those, you can get an idea of which of them are offering good deals. However, if you compare multiple APRs, you'll get the bigger picture of how much it will cost to take out a loan with each lender.
This way, you can compare compare apples to apples and see where some lenders may have lower rates but higher costs in other areas.
At Low VA Rates, we have a $250 Lowest APR Guarantee, where we offer $250 to anyone who closes with another lender at a lower APR than we can offer. We have written a few checks over the years, but we can usually beat other offers.
Check with lenders to see if they have similar guarantees or can beat other offers you find. Remember that you're in the driver's seat when it comes to your loan.
4. How Do I Lock My Rate?
It's also wise to ask what the process is like for locking in your VA loan rate. Locking your interest rate now can protect you when rates change in the future.
Some lenders may lock your rate just a few weeks before closing. Others, like Low VA Rates, will lock loans after the initial disclosures have been submitted; we even make exceptions and can lock the rate shortly after receiving all the initial documentation.
As you learn when different lenders lock rates in on loans, you can narrow your options to those who make it easiest to lock your rate.
Additionally, ask whether they charge for locking your rate. If they do, ask if they're willing to drop that charge.
5. What Are the Closing Costs Involved in the Loan?
Before choosing a lender, it's a good idea to have a conversation with them about closing costs.
Comparing costs between lenders is much easier when you know what you're looking at—plus, you can also compare how straightforward different lenders are in their descriptions of costs you can expect to pay at closing.
One thing that'll help you in comparing costs is your Loan Estimate (LE), which you'll receive after applying for the loan. Formerly called a Good Faith Estimate (GFE), an LE is the lender's best estimate of what your loan rate, closing costs, and monthly payment will look like.
Don't be afraid to ask lenders to explain the numbers to you. You can also challenge their costs by comparing them with quotes from other lenders.
6. How Long Is Your Average Closing Process?
How quickly VA loans close depends in part on what type of loan they are. Lenders should usually be able to close in around 2–3 weeks for a VA Streamline (or IRRRL); for VA cash-outs and VA purchase loans, you can expect a time frame closer to 30–45 days.
Knowing these time frames is important because some borrowers have a certain amount of time they need to work within.
Perhaps you got permanent change of station (PCS) orders and need to move in the next few months. Or maybe a seller wants to sell their home quickly, and you need a loan that can close within a month.
In either of these situations, knowing each lender's expected time frame will help you gauge whether their timeline fits your needs.
7. How Do You Communicate with Borrowers?
Even though it can be an easy part of the loan process to overlook, your lender's communication skills can make or break your loan experience.
Though most lenders will probably feel like they communicate well with their clients (and tell you that), asking them how they communicate can still be useful.
Ask and listen for specifics they can provide on the spot, such as:
- How quickly they respond, on average, to clients
- Whether their loan officers are available at any time
- What kinds of relationships they have with borrowers
- How often and how quickly they communicate updates about the loan
- What communication methods they use (like phone calls, texting, emails, video calls, and Facebook chat)
- Better Business Bureau
You won't want to take their answers at face value, however. One of the best ways to feel out which lenders are a good bet is to look at trustworthy reviews online. Though most lenders will probably feel like they communicate well, reviews can tell another story entirely.
Ask lenders where you can find their reviews, but also do some exploring on your own. Look for reviews hosted by third-party websites. As you look through reviews, you'll pretty quickly learn how borrowers felt about the communication skills of their lenders.
8. Do You Have Any Overlays?
The VA has specific requirements that every VA loan must meet, but as previously mentioned, not every VA loan is the same. Lenders can add their own requirements, called overlays, that go beyond what the VA requires.
Ask what these overlays are for the specific type of VA loan you're looking for (purchase, cash-out refinance, IRRRL, etc.). This can help you figure out whether you'll qualify and give you a feel for just how veteran-friendly a lender is.
One specific question you may want to ask about overlays is this: Do You Have Minimum Credit Score Requirements?
While the VA does not require VA loans to have minimum credit scores, most VA lenders have credit score overlays. Asking about overlays can help sort out which lenders are most willing to work with you.
At Low VA Rates, we're adamant about this one because we feel like lenders should not turn veterans away based solely on a number. That's why we don't have a minimum credit score requirement and, when determining eligibility, are open to considering the broader picture of a veteran's financial life.
9. What Are the Discount Points and Origination Fees?
Many lenders charge discount points, which are payments you make to receive a lowered interest rate.
These points can be helpful, especially if you plan to stay in the home long-term. However, if you’ll be in the home for just a few years, using discount points will usually end up costing you more than if you simply went with the higher interest rate.
Find out what each lender charges for these points and how they'd negotiate if you'd like to pursue paying or not paying them.
Additionally, origination fees are costs you pay for the processing, underwriting, and origination of a loan. These fees are only permitted to add up to 1% or less of the loan amount, but this can still be a substantial amount of money.
Find out what kinds of fees you'll be charged so you know upfront what to expect.
Watch our video below to listen to one of our loan experts, Maurice Navarro, discuss what to look for in a VA lender:
And if you're still wondering about what questions you should ask a VA lender or how to navigate finding a good lender, please explore our additional articles and videos below:
Feel free to contact us at Low VA Rates anytime. We’re happy to help you compare offers, understand the numbers, and even find the best lender.