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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 underwriter every opportunity to build a case for extending credit to qualified Veterans, and this move made it a little harder.

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.

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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.

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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 is 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.

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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%.

Don’t Take No For An Answer

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 they are able to manually underwrite VA loans.  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.

Find a lender that is willing to fight for you and manually underwrite your VA home loan.  We are out there and don’t mind working extra hard to qualify Veterans for home loans.

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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 not one of those lenders.

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About Your Expert

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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  • Emily Allen says:

    We have an automated approval for VA loan. We have had EMD, inspection, appraisal. LO said it was just sent to underwriting and has asked for 6 more documents, which we have provided. Here’s where it gets interesting. For several years my husband went through mental health treatment and basically stopped caring. He didn’t file his taxes for those several years. A few months ago we obtained a tax attorney and filed all his taxes. We just now got the initial letters back stating what he owes. The lawyer is setting up a payment plan, but we have not gotten it yet. No liens have been placed, and it’s not on CR. The tax transcripts showed what the balance due was for each year, but our LO didn’t question that. What are the chances this fails in underwriting because we have not yet established a payment plan?

    • Scott Schang says:

      Hi Emily, this is a really good question. Most lenders “should” follow your automated underwriting findings. If your income used on your application is W2, and you are not self-employed or using any self-employed income, the tax returns should not even come up.

      Some lenders may try to execute a 4506T, which gives the lender permission to request your tax transcripts from the IRS, but they shouldn’t have to do that unless the automated findings require it.

      If you are both W2 employees, pay stubs and W2’s should suffice, and the tax returns will not be an issue. All of that said, underwriters and lenders may ask for tax returns as an overlay to the underlying guidelines.

      Bottom line, if your income is W2, you shouldn’t have to worry. If the lender does ask about the taxes, shoot me an email to scott@findmywayhome.com and I will introduce you to someone I know and trust that will not ask for the tax returns.

      Hope this helps?

  • christopher vickery says:

    My mom just got denied by a manual underwriter for her VA loan. she got a second job recently and thy wouldnt add it into her income which would cover the loss after my brother graduates highschool because she has to work there for atleast 6 months. At the same time they struggled with the fact that her only dependent which she gets money from the goverment to take of until he finishes highschool will finish in 2 years and 9 months instead of 3 years. He also home schooled and is not on the school district schedule so it wouldnt matter but they still denied her from what we expect to be that reason.

    She has no debt and pretty good credit. Renting a house with rent thats $200 higher than the mortgage. Also history of using the VA loan before so everyone is baffled by the results. They don’t seem to take any income given by the goverment as actual income. She is flustered to the point of wanting to give up and afraid she will be homeless unless she signs the lease for another year. The whole proccess was borderline predatory in my opinion.

    • Scott Schang says:

      Hi Christopher, I’m really sorry to hear that your Mother is having such a difficult time. I definitely do not think anyone is doing anything wrong here. Second jobs and losing the government income are both very real challenges.

      That said, some loan officers will fight harder than others, and actually work with the VA exhaust all possible options. This is a challenging scenario, I want to be honest with you, but that doesn’t mean that you shouldn’t get a second opinion.

      If you would like, shoot me an email to scott@findmywayhome.com, and let me know what State you’re buying in. I know many, VERY experienced loan officers that I would trust for a second opinion.

      I’m happy to make an introduction! I hope this helps?

  • Marea Singer says:

    Hi Scott. My husband is a disabled retired vet. We applied for a VA construction loan preapproval. Our credit scores are in the 800’s. DTI is below 41%. We have $19,000 in liquid assets. I am not working. My husband receives VA disability income and he is a truck driver. That was also his job with the military. He was Schedule C from 2014 to 2018. In December 2018 accepted a job with a trucking company. The lender said that we must wait until he has been with his employer for one full year, even though this has been his career for many years. The lender said it’s because he’s not paid salary, he is paid mileage per load. This is standard for long distance drivers in the industry. It just seems ridiculous to be denied based upon his length of employment with our credit profile. Any suggestions or your thoughts?

    • Scott Schang says:

      Hi Marea, I am so sorry to hear that you are having these challenges. This is a tough one, I am going to be honest, it is definitely going to require an experienced loan officer that can document and explain your way through this.

      You’re up against two different challenges here. The first is time on the job is less than 1 year, the second issue is going to be the “variable” income. I personally have experience helping truck drivers qualify, and it can be challenging.

      If his monthly income (miles) are fairly consistent for the entire time he’s worked for them, and if it is similar to his past income from truck driving, I think there’s a case to be made here that this is not a high risk situation. Especially with your reserves, credit score and debt to income ratio.

      What State are you buying in? I know many, very experienced loan officers across the Country. I think we need to get you a second opinion!

      If you could, please shoot me an email to scott@findmwyayhome.com and let me know what State you’re buying in.

      THANK YOU for your Family’s Service, I hope this helps?

  • Michael Mason says:

    Good Morning Scott,

    I was looking for options when our VA loan was denied. I came across your information and wanted to reach out. We tried to process through Veterans United. My credit score is the problem. It ranges 580 to 602 (Equifax to Experian). My husbands is about a 710. Our gross annual income is roughly 194,000. Please let me know if this is something you would be able to assist with.


    • Scott Schang says:

      Good morning! Yes, I can definitely help. Veterans United might not be a good option for that credit score range, but that certainly does not mean you couldn’t qualify for a VA loan.

      The next step is to get a second opinion from a professional loan officer (not a call center) that has experience with VA.

      Shoot me an email to scott@findmywayhome.com and let me know what State you’re buying in. I will introduce you to someone that I know and trust.

      THANK YOU for your Service! I hope this helps?

  • Eric Flores says:

    Is the VA home loan program a gimmick?
    It’s seems to me that there’s a lot of redtape.
    What type of benefits is this if a veteran is denied?
    Especially if that veterans have good credit, a good salary, and have served well and honorably to his country?

    A veteran, regardless, of his credit situation, student-loans etc. Should be given the opportunity in his life to be a home owner. There should be not redtape on a veterans home loan application. I strongly believe that his benefit is false and is ridden by hectic rules that are considered redundant or bureaucratic and hinders or prevents action or decision-making. It prevents good people from obtaining what they deserve to get based and their service and sacrifice.

    • Scott Schang says:

      Hi Eric, far from being a gimmick, and to the contrary, VA has less red tape than any other loan program available on the market today. Also, my experience is that the VA will go out of its way to make exceptions to help Veterans.

      I am 100% in agreement that our Veterans should be given special exceptions and considerations for their sacrifice, and for the most part, they do!

      Do you have a specific situation that I can try to help with? It sounds to me like you may have talked to someone that doesn’t understand the VA loan.

  • Pullingmyhairout says:

    Hi Scott,

    I purchased a house with my wife using my VA benefit and ended up having to sell it a little over two years later. We were late on our last payment, which was almost 12 months ago. We have applied for another VA loan and we were rejected under the automated underwriting. The reason was the 12 month rule for a late, which made sense to me.

    We went back to our old mortgage company as we figured we had great payment history with them save for the last late payment. The started what we thought was a manual underwriting process, but it seems like a complete run around. We have been through the mortgage process before, so we know how tedious and paperwork heavy it can be, but we seem to keep being given a moving target.

    My questions are:

    1. We have been told that jobs in your work history that are very different from your normal profession can be disqualifying. Two other loan officers explained that it has to be extreme and said my situation was no worry. The current mortgage claims that my history disqyalifies me. I have worked as a labor Relations Representative for most of my career. I worked as a Human Resources/Labor Relations Investigator for one year. I have been told that this is disqualifying. Is it, and if so, how long do I have to work in another labor relations Representative job to qualify again?

    2. My work can be somewhat niche in different parts of the country. The job I took across country was a temporary 6 month position with the possibility of being hired permanently. I wasn’t kept on and separated on good terms. I was employed for 5 months when I obtained a position and had to move all the way BACK across country. I have been told that the unemployment disqualifies me. Does it, and if so, how long do I have to wait?

    Thanks for your help!

    • Scott Schang says:

      First and foremost, THANK YOU for your Service! I don’t know if I have enough information to be able to fully explain why you’re getting the answers you’re getting, but I can see where a couple of these issues would throw a hurdle in the approval process.

      As far as your job description – that is rarely ever an issue. I think more likely that pushback was due to the temporary nature of the 6-month position. While it’s true that you cannot calculate unemployment as income for qualifying, unemployment in and of itself would not disqualify you from qualifying. If you are employed full time now, and the probability of continued employment is good, then you should be able to use your current income.

      VA has some of the most flexible underwriting guidelines of any of the loan programs. What State are you trying to buy in? I would like to introduce you to someone that I know and trust that has extensive experience with VA manual underwriting.

      Hope this helps?

      • Pullingmyhairout says:

        Yes, it does help! It sounds like this mortgage company is very inexperienced with manual underwriting and VA guidelines. It sounds like they are blaming the VA for what might be their own overlays.

        A referral would be greatly appreciated. I am in Maine, in the Bangor area.

        Thank you!!!

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