The federal government isn't well known for cutting red tape and reducing bureaucratic obstacles. Recent changes in the VA home loan program, however, may be turning that perception around a bit.
VA loans are popular with veterans, allowing 100 percent financing of a home loan, low loan rates and closing costs, and no private mortgage insurance. The loans are provided by private lenders, and the Veterans Administration guarantees a portion of the loan so borrowers can get more favorable terms.
But excessive paperwork and sometimes slow home appraisals, along with service members sometimes not being educated on how the process works, led to a view that the program could be a lot easier to work with.
Pre-approval goes online
One of the biggest changes is that customers can obtain their Certificate of Eligibility, or COE, online to help expedite the pre-approval process, says David Hosterman, branch manager at Castle & Cooke Mortgage in Greenwood Village, CO.
"Potential borrowers can typically know immediately if they are pre-qualified for a VA loan," Hosterman says.
The form is needed to list eligibility requirements that are met, such as if the applicant has enough military service time to be eligible for the program.
Ed Hoffman, owner of Wholesale Capital Corp. in California, remembers sending messengers 10 years ago from his office to Los Angeles to get a COE. The process is now online and done in seconds.
"The VA finally got into the 21st century and computerized a lot of stuff that we used to do manually," Hoffman says, adding that it probably saves a week of work.
Automation of the COE process has allowed 70 percent of them to be approved upon submission without any human involvement, making the process faster, says Mike Frueh, who heads the program, in an email exchange.
While the VA is improving its computer systems, the home loan department is still very compartmentalized with different systems in different parts of the loan process, says Jason Skinrood, a loan officer at National Guard VA Home Loans in Utah. Some forms have different systems that don't match with others, Skinrood says.
The 71-year-old VA loan program is automizing more things to keep pace with other loan products, Frueh said in an intervew with Veterans United Network.
"The biggest technology my grandfather had when he was interacting with the VA home loan program was a pen and a stamp," Frueh says. "Technology has come a long way since then. We've developed a lot of systems, and we have access to a lot more information than we ever had before."
Home appraisals by the VA differ from those for conventional and other loans by looking more at a home's condition - much of it cosmetic - and it can take a little longer than the typical five days for an appraiser of a home financed with a conventional loan.
A VA appraisal includes inspections for pests such as termites, and of a well or sewer line on the property. The point is to ensure the homes are move-in ready so that a military buyer doesn't have to spend money on repairs.
VA inspections take five to 14 business days in the areas Skinrood serves, he says. The VA says that nationally its appraisals come back in less than 10 days on average, though it can take longer in remote areas.
"Typically where you run into issues with VA approvals on the timeframe is where there's a lot of vets living," such as in rural areas or near military bases, Skinrood says.
Technology speeds turnaround times
New technology is again helping the VA improve turnaround times for appraisals, which are requested through the VA portal so a VA-approved appraiser can schedule an appointment.
"We've added technology to make the analysis of the appraisal quicker," Frueh, the VA home loan program chief, said in the interview with the veterans group. "We know something about almost every parcel of real estate anywhere in the country that a veteran wants to buy, which allows us to get a value from the appraisal much faster than we ever could before."
Valuation reports also come to the VA quicker because they're attached to its appraisals.
Seek to be quicker than FHA and conventional mortgages
Approvals of the VA Notice of Value, or NOV, now have the goal of being reduced from an average of four days to one day, Frueh wrote in an email.
"That would bring our time to close loans down by three days, which would put VA loans closing two days faster than conventional and four days faster than FHA, nationwide," he wrote.
All of these changes should be great news for veterans and their families, and also for home sellers who may have previously thought that VA home loans had longer turnaround times than other home loans, Hoffman says.
"If the sellers think VA loans are going to be longer to close, then they're not going to take VA offers," he says.
A faster loan process could be cutting through that red tape and making veterans' home purchases a lot less bureaucratic.