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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.

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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.

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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%.

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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.

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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.

About the Author

Scott Schang

A 20 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

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  • Cynthia Knighten-Torrence says:

    Hi My name is Cynthia and my husband is a Veteran. We received an approval letter from our lender on June 2, 2020 stating we were approved for the VA loan. Fast forward to now, we are suppose to close on August 6, 2020. We received several emails stating no additional documents are required. Now on today(07/27/20) we received an email stating we need a side by side comparison of my husband’s supplemental income for 2019 and 2020. My husband supplemental income decreased due to Covid-19. Is it customary to approve a VA Loan in June 2020 when Covid-19 was the factor in which the State of Arkansas begin to shut down. My question can our lender disapprove the loan once it has been approve?

    • Scott Schang says:

      Hi Cynthia, first and foremost, I want to Thank You and your Husband for your Service.

      Supplemental income is typically averaged over a 2 year period. Even if that income is down now, it shouldn’t impact your overall ability to qualify.

      VA is also VERY flexible with your Debt to Income Ratio. Make sure you ask your loan officer what is going on.

      COVID has changed things for sure. The VA does not want to put you into a loan that you cannot afford, that is the reason for the income review.

      Your loan can absolutely be disapproved all the way up until it funds. Your approval is conditional until it’s closed.

      If you are concerned about your loan officer or lender, I can introduce you to someone that I know and trust for a second opinion.

      If you would like, shoot me an email to scott@findmywayhome.com and I can make an introduction.

      Honestly, you should be ok. Just put pressure on your loan officer to give you an answer NOW so you can change lenders if they cannot do it.

      I hope this helps?

  • Sherry Pettway says:

    Can you get a VA loan while in Chapter 13 or does it have to be discharged?

    • Scott Schang says:

      Hi Sherry, thank you for your Service and thank you for your question.

      The VA underwriting guidelines state that if you have made on-time payments for 12 months, and have permission from the Trustee or the Bankruptcy Judge, you may be able to get a VA loan while still in a Chapter 13.

      Here is the guideline from the manual:

      Bankruptcy Petition Under Chapter 13 of the Bankruptcy Code

      This type of filing indicates an effort to pay creditors. Regular payments are made
      to a court-appointed trustee over a 2 to 3-year period or, in some cases, up to 5
      years, to pay off scaled-down or entire debts.

      If the borrower(s) has finished making all payments satisfactorily, the lender may
      conclude that the borrower has re-established satisfactory credit.

      If the borrowers) has satisfactorily made at least 12 months’ worth of the payments
      and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may
      give favorable consideration.

      I hope this helps?

      If you would like an introduction to a loan officer that is familiar with VA manual underwriting, you can send me an email to scott@findmywayhome.com and let me know what State you’re living in, or trying to live in.

  • Jessia English says:

    Our loan was denied in underwriting because we didn’t meet established credit history. Can you help us? We thought everything was ok. This is going to crush our kids.

    • Scott Schang says:

      Hi Jessia, I’m so sorry to hear about this. VA does allow non-traditional credit like utility bills or rental history if your credit report is not adequate.

      If you can send me an email to scott@findmywayhome.com, let me know what State you’re buying in. I can connect you with a VA loan expert that I know and trust to give you a second opinion.

      I hope this helps?