Navy Federal VA Loan

The Department of Veterans Affairs administers the VA loan program, but it doesn’t actually lend. Instead, a number of VA-approved banks, credit unions, and mortgage companies originate these loans. As such, we’ll use this article to provide an overview of the Navy Federal VA loan.

Specifically, we’ll discuss the following:

• VA Loan Overview
• Navy Federal Overview
• Navy Federal VA Loan Information
• Final Thoughts

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VA Loan Overview

As stated, the Department of Veterans Affairs doesn’t actually lend money. Instead, the VA guarantees a portion of each VA loan made by lenders (e.g. banks, credit unions, etc.). This guarantee protects these lenders from default. In other words, if a borrower stops paying back his or her VA loan, the government will reimburse a portion of the outstanding loan balance to the lender.

Due to this protection, lenders face far less risk with these loans. And, they pass this reduced risk on to veterans by offering outstanding terms for VA loans. Of note, VA loans:

• Do not require a down payment
• Offer extremely competitive interest rates
• Do not require private mortgage insurance, or PMI
• Allow for a streamlined refinancing through the IRRRL program

And, Navy Federal Credit Union, or NFCU, serves as one of these VA-approved lenders. While the VA provides overarching guidance on the VA loan program, Navy Federal dictates specific terms regarding loan applications, approval, and processing. In the remainder of the article, we’ll discuss both NFCU as a whole and the Navy Federal VA loan.

Navy Federal Overview

Seven Department of the Navy employees founded NFCU at the end of the Great Depression. According to company documents, these founders: “wanted to help themselves and their co-workers reach their financial goals. They envisioned a credit union that would offer loans with affordable rates and manageable terms. They wanted to encourage building financial security by providing a safe place to deposit savings and earn dividends. And, to reach these goals, these founders pooled their money and invited others to join.”

Despite its Navy background and naming, NFCU now serves the financial needs of officers and enlisted men and women of all branches of the military, veterans, DoD employees and their family members. And, the company now serves over 10 million member-owners.

And, this member-owner designation represents a particularly unique characteristic of Navy Federal. In particular, the institution prides itself on the fact that it is: “A member-owned and not-for-profit credit union exclusively serving the military, veterans and their families. Our members are owners, not just customers, and each one of them has a vote. Due to this not-for-profit status, any surplus funds are returned to our members as dividends, reduced loan interest and improvements to our products and services.” And, these member-owner benefits translate to great rates, lower fees and exclusive discounts.

Bottom line, Navy Federal intimately understands the unique situations and financial needs of its military members, making it a great option for a VA loan.

Navy Federal VA Loan Information

About the Navy Federal VA Loan

While a multitude of VA-approved lenders exist, very few can claim the experience and quality that Navy Federal does. In particular, NFCU is a Top-5 VA lender in the country, meaning that its loan officers: “Understand the unique needs of servicemembers and their families, and can help you take advantage of every benefit you’ve earned. [And, they’re] here to help you through the home-buying experience by providing low VA loan rates, resources and membership benefits.”

Loan Application Process

Navy Federal allows members to begin the VA loan application process online. And, after the initial application, members continue to work through the application process with designated loan officers and underwriters. Broadly speaking, the application process consists of the following steps:

• Step 1, Apply Online: Members sign into their Navy Federal accounts to begin the VA loan application process. This includes submitting basic information about themselves and their financial situations.
• Step 2, Loan Officer Contact and COE Confirmation: After you complete your initial application, Navy Federal will assign a mortgage loan officer to you. This individual will walk you through the remaining steps of the loan application process, to include validating your VA loan eligibility via a Certificate of Eligibility, or COE. (NOTE: Your NFCU loan officer can pull your COE on your behalf). Typically, this step concludes with the applicant receiving VA loan pre-approval.
• Step 3, Underwriting and Due Diligence: Next, your loan officer will serve as your primary Navy Federal point of contact as you go through underwriting, which will include validating all of the financial information you submitted on your initial application (e.g. reviewing paystubs, tax returns, bank statements, etc.). Additionally, part of this due diligence period will include getting a VA appraisal on your desired home, a requirement for all VA-approved lenders during the application process.
• Step 4, Closing: After the Navy Federal underwriters remove all the conditions on your loan application, to include those related to the VA appraisal, you will be cleared to close on the loan. This final closing process will involve signing all closing documents with either A) a settlement company, B) a real estate attorney, or C) a notary on behalf of one of the first two options. Once you close on the loan, Navy Federal will release the loan funds to the seller, and your home purchase will be complete.

Pros and Cons to the Navy Federal VA Loan

• Pro 1, Competitive Rates: VA loans, due to their government backing, tend to have low rates compared to conventional mortgages. And, as a member-owned, not-for-profit credit union, Navy Federal offers particularly competitive rates on its VA loans.
• Pro 2, Military-friendly with VA Loan Experience: Unfortunately, many VA-approved lenders don’t understand the military and veteran experience. As a military-focused credit union, Navy Federal loan officers are intimately familiar with the unique needs and situations of its military borrowers.
• Pro 3, Doesn’t Sell Mortgages: Most loan originators sell their mortgages to a third-party investor. This means that, when you close on a mortgage, you have no idea who will actually service it. Navy Federal, on the other hand, doesn’t sell any of its mortgages. That way, you can take comfort knowing that NFCU employees will always service your VA loan.
• Con 1, Must be a Member: The first major drawback to Navy Federal VA loans is that, to get one, you must be an NFCU member. However, as long as you or one of your family or household members has ties to the Armed Forces, Department of Defense, or National Guard, you can join.
• Con 2, Not Many Brick and Mortar Locations: Currently, Navy Federal only has 345 branches (compared to, for example, Wells Fargo with 8,050). And, as a military-focused credit union, most of these branches are located around military installations. This can make finding one challenging for certain members. But, Navy Federal also offers incredible online and remote services, meaning you can complete most of your banking – and VA loan – needs without ever setting foot in a branch.
• Con 3, Slow Underwriting Process: Navy Federal does have an extremely thorough – and often slow – underwriting process. Among real estate agents, it’s generally understood that, if the buyer uses NFCU financing, the closing won’t occur on time. More often than not, Navy Federal underwriters will require several days after the proposed closing date to actually close the loan. For the overall quality borrowers receive, this is a small price to pay – you just need to account for this buffer in your purchase timeline.

Final Thoughts

Overall, Navy Federal offers an outstanding VA loan product and application process. While certainly not the only VA-approved lender, NFCU does stand out as one of the best.

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Maurice “Chipp” Naylon spent nine years as an infantry officer in the Marine Corps. He is currently a licensed CPA specializing in real estate development and accounting.

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