Was Your VA Home Loan Declined? Don’t Take No For An Answer
If your VA loan was denied, it’s possible that your loan officer made a mistake or the lender does not do manual underwriting on VA loans.
VA underwriting guidelines are for the most part written to give an experienced loan officer and underwriter every opportunity to build a case for extending credit to qualified Veterans.
In some cases, you will not get an automated underwriting approval, but that does not mean that you are not still eligible for a VA loan.
Automated vs. Manual Underwriting
Automated underwriting is an online portal that a lender uses to upload the loan application, income, assets, reserves, and all other vital qualifying criteria and it spits out a conditional approval or declines the application along with an explanation of why.
Manual Underwriting is available when you are unable to get an automated underwriting approval. A manual underwrite simply means that the automated method is ignored, and an underwriter will physically review all of your documentation and determine if you are eligible for a VA loan.
This is also common with FHA mortgages but unavailable for conventional financing.
My VA Loan Was Denied
A loan can be denied by the automated underwriting system for any number of reasons. It could be that something was input wrong. It could be because something was reported wrong on your credit.
It could be because there was a credit issue in the past that requires that your loan be automatically downgraded to a manual underwrite.
In any case, VA loans offer a lot of flexibility and options. Just because you are unable to get an automated underwriting approval doesn’t mean you are not eligible for a VA guaranteed loan.
Manual Underwriting Might Be The Answer
Manual underwriting is a different story. Manual underwriting means that a VA home loan underwriter has to physically calculate debt to income ratios, qualifying disposable income requirements, past rental payment history to name a few.
There are no exceptions with manual underwriting. Debt to income ratios strictly limit all of your monthly expenses, including proposed housing expenses to 41% of your gross monthly income.
This is pretty tight in terms of qualifying for a home loan when you consider that FHA DTI will allow up to 56% and conventional DTI 50%.
Manual underwriting does not mean that you will automatically qualify. This option is much more strict than automated underwriting and can help in some cases.
Don’t Take No For An Answer
Manual underwriting is not a magic bullet. In the overwhelming majority of cases, inexperienced loan officers or strict overlays are the reason for being denied for a VA loan.
If your lender is not approved to do manual underwriting on VA home loans, you may be told you’re not approved without further explanation or options.
Should this happen, ask your lender if manual underwriting is an option. It’s much more work for the lender and the underwriter, and may require much more documentation from you, the borrower – but don’t take NO for an answer…yet.
There are a LOT of call center lenders out there that prey on Veterans. The risk is just far too great that an inexperienced loan officer will make a mistake that could cost you sleep, time, and money. Experience matters.
My biggest fear is that when things get harder to do, some lenders will be unwilling to put in the extra time and energy to fight for you. We’re are not those lenders.