If you have served in the military, you may be eligible for a VA loan, which basically allows you to get the home loan you need without mortgage insurance, any down payment, or future excessive interest rates. Those who are currently on active duty and have 90 days of continuous service under their belt or National Guard and reserve members with six years of service are eligible to apply. If you are approved for a VA loan, you need to read the contract carefully before you sign on the dotted lines. In particular, you want to look for these three contract contingencies.
Terms Allowing You Your Money Back If There Is a Problem with the House
More often than not, you'll apply for a loan before you have even fully inspected the house or property that you are interested in purchasing. In the event that an inspector gives you the unfortunate news that the house is not what it seems and actually has a lot of underlying problems, like an unstable foundation or unsafe electric wiring, you might not be interested in purchasing the house anymore. This is especially true if you are going to have to spend a significant amount of money on repairs.
With that said, you want to make sure that the VA loan contract includes contingencies that will allow you to get any money you've put down for the loan back if the house does not pass inspection. You need to make sure that you won't be penalized and be required to pay extra fees and charges.
Conditions Regarding the Failure of the Sale of the Current House
In addition to making sure that the contract includes contingencies that stipulate that you'll be able to get your money back should the house fail inspection, you also want to make sure that there are contingencies in place that will allow you to get out of the loan in the event that your current house does not sell. Depending on the lender, different terms and conditions may be included in this contingency, as your situation must fall amongst certain circumstances for you to be let off the hook.
For example, the contingencies may state that your house needs to be on the market for at least a certain number of days. It may also state that you need to prove that you have put in a reasonable amount of effort in trying to sell the house. This may include hiring a realtor or even cleaning your current home so that it is presentable and marketable.
Statements Promising You Won't Be Dinged in the Future for Backing Out of the Loan
In the event that you back out of the loan, you want to make sure that you won't be penalized for your decision in the future. Getting re-approved can be difficult. With this said, make sure that the lender clearly states that you won't be dinged in the future for backing out of the loan and that your decision now will not influence any applications that you submit at a later date.
This is because some lenders may make a note of the fact that you backed out of the loan on your file and may take this fact into consideration in the future when determining whether to approve your application or not. Even if it does not affect your ability to get approved, it might affect the interest rate that they offer you.
Conclusion
Although getting approved for a VA loan is very exciting news, as it means that you are one step closer to your dream home, you need to carefully read the fine print of the contract before signing it. If there is any jargon or wording in the contract that you don't understand, make sure you ask for clarification or for more information.
Talk to a company such as Texas Veterans Home Loans for more information.
