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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, that some lenders will be unwilling to put in the extra time and energy to fight for you.  We’re not one of those lenders.

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

Leave a Question or Comment About this Topic

  • Jill Gannon says:

    Is it true that in order to use a VA loan to refinance the veteran and the co-borrower must be married? Even if the veteran is on the deed to the home for over 12 years?

    • Scott Schang says:

      Hi Jill, it is true that a non-veteran that is not married to a veteran may not use a VA loan. There are a couple of ways around this. If you have a current VA loan now, and you’re only interested in reducing the rate and payments, there is a program called the Interest Rate Reduction Rate Loan (IRRRL). This loan does not require income verification, and therefore the Veteran can refinance as long as you can reduce the rate by a minimum of.5%. If you need a non-veteran’s income to qualify, then you may not be able to use a VA loan to refinance. There is a way, but it’s a little more complicated, and the loan amount cannot go to 100% of the value, which is Veterans are allowed to do.

      If you would like a second opinion, you can shoot me an email to scott@findmywayhome.com and I can introduce you to someone I know and trust that specializes in the VA home loan program.

      Hope this helps?

  • Espi says:

    Hello Scott,

    My husband just retired after 20 yrs in the Air Force. We have previously purchased a house with a VA loan but had to short sale our house during the housing crisis. We are trying to purchase another home now but are being told we do not have enough “points” or “credit” with the VA home loan program to attain the loan we need. We have gone through automated underwriting already. They say that the VA will only guarantee a portion of our loan and we need to come up with $21,000. Please, if you have any way to help I would be truly grateful.

    • Scott Schang says:

      Hi Espi, first and foremost, thank you and your Husband for your Service! That makes sense. Even though a short sale is not considered a “hardship” that requires a waiting period, if the previous VA loan was not paid in full, you would not have your full VA housing benefit restored. Depending on what price range you’re buying in, and when the short sale is, you may be able to use Conventional financing with a 3% to 5% down payment, or FHA which only requires a 3% down payment. Also, have you looked to see if the home you want to buy is in a USDA eligible area?

      I would love to help you through this. If you would like, shoot me an email directly to scott@findmywayhome.com and let’s work through these options. Also, let me know what State you’re buying in and I may be able to introduce you to someone that I know and trust that specializes in VA guidelines.

      Hope this helps?

  • Diane Kenyon says:

    Another scenario. Va husband just got out of service after 8 years. Wife was off work 2 years having two babies. She is now back full time. They qualify on her income alone but UW states needs at least 6 months on job. Can you use her job she had prior to 2 years she was maternity leave?

    • Scott Schang says:

      Hi Diane, not sure if this is the same family as your other question? Typically a gap in employment can be overcome if it is only a short gap, and you have a good explanation. a 2 year maternity leave may be a tough one to overcome. If she has resumed her job at the same employer as prior to maternity leave, and she’s in the same position at relatively the same salary, then you may have a case. You cannot discriminate against any borrower on Maternity leave, but you have to show that the company was aware of the length of the leave, and that her job was guaranteed at the end of the leave. Again, VA underwriting can be very flexible but you need a very good paper trail, and a very good explanation for anything outside of the ordinary guidelines.

      Probably the best I can offer is a second opinion. There are many factors that go into a loan approval, especially a manually underwritten VA loan. If you would like, I would be happy to introduce you to a loan officer that I know and trust that has experience with VA guidelines.

      If you would like that introduction, just shoot me an email to scott@findmywayhome.com and let me know what State you’re trying to buy in?

      Hope this helps?

  • Diane Kenyon says:

    If you have lates after a chapter 7 bk are you dead in the water or is there a waiting period to get a home loan?

    • Scott Schang says:

      Hi Diane, VA is very flexible if you’re working with a lender that has a lot of experience with VA manual underwriting. Having late payments after a Chapter 7 BK is not great, but if you can show that it was not financial irresponsibility, it may not prevent you from qualifying. You would have to run it through the automated underwriting system (AUS) first, and see what the results are.

  • Michelle Harcher says:

    Hi we just received our COE and are putting a contract on a house. I have been reading people are having issues with VOR. Iwe have been paying rent in cash for 2 years now. Will they take a statement from our landlord as proof? Not sure how this works

    • Scott Schang says:

      Hi Michelle, first and foremost, Congratulations on buying your home, and THANK YOU for your Service!

      You will want to wait until you get the Automated Underwriting System (AUS) findings back. It will tell you if a VOR is required or not, it’s not guaranteed that you will need one. It would be pretty unusual for an AUS approval to ask for a VOR.

      IF a VOR is required, a letter from a private landlord is not typically sufficient documentation. If you’ve been paying cash for 2 years to a private landlord (not a management company), a VOR could be a real challenge. The chances of a VOR being required are pretty slim though. Now, if you’re paying cash to a property management company, that is 100% acceptable by the underwriter, even if you’re paying in cash. But a private landlord is a little more difficult to document.

      I wouldn’t worry about it too much until you get the AUS findings. If you are AT ALL CONCERNED about your loan officer’s experience with VA loans, I can introduce you to a VA expert that I know and trust.

      If you cannot get AUS approve/eligible findings, you’re going to want to work with a VA expert to help get you to the finish line.

      Shoot me an email to scott@findmywayhome.com and let me know what State you’re buying in if you would like an introduction and a second opinion!

      Hope this helps?


    Good morning. My boyfriend is in the middle of getting a house and its under contract. They ran the VA loan twice and its been denied. They are claiming theirs is nothing they can do. Can you please help us.

    • Scott Schang says:

      Hi Nicole, please send me an email to scott@findmywayhome.com and let me know what State you’re buying in. It sounds like there is either an issue inputting the data into the automated underwriting engine, or you require a manual underwrite. I can definitely help point you in the right direction and introduce you to someone that can do a manual underwrite.

      Hope this helps?

  • Bob Black says:

    I received a COE from the VA, had a house built, did a final walk through, had the loan funded and underwritten, have my house under contract, spent about 10,000 getting my residence ready to sell, have the kids enrolled in a new school, closing day the VA denied my loan for being short 3 days. This happened on Friday and I am waiting for Monday to see if they will fund the loan. If they don’ t there are a lot of people that are going to be put into a bind. I was told I was given the COE by accident and it should never of been issued. This is the only time I have ever tried to get a VA loan and I did everything I was suppose to do. Do I have any recourse?

    • Scott Schang says:

      Hi Bob, first and foremost, thank you for your Service. This is a really tough one….the VA is allowed to make mistakes. This is a highly unusual situation, and the VA will typically make decisions that benefit the Veteran. In my opinion, it is unlikely that if you do not meet the service days requirement to be eligible, that VA will not guarantee the loan.

      Your recourse would be to line up alternative financing. First, check to see if the home is in a USDA Eligible area – if so, you have 100% financing available on very similar terms as VA.

      Your next options would be a 3% down HomeReady or Home Possible Conventional loan, or FHA loan with 3.5% down payment. The builder should be flexible considering the error was outside of your control.

      This seems like an honest, albeit very inconvenient mistake, but it’s not the end of the road!

      Hope this helps?

  • Yolanda says:

    I need help I’ve been in the process of having a home built Since September of 2018 fast forward the home is built we received an email 2 weeks ago with our walk through date and closing date March 13th and 15th today I received an email from my lender telling me the VA has refused to underwrite the loan because of the code for my monthly VA benefits is coming up as not being permanent income so they can’t count it. What can I do

    • Scott Schang says:

      Hi Yolanda, it doesn’t make sense that your lender would not have known if there was an eligibility challenge until now?! I am so sorry this happened. I do not know if this is a real problem or not, and I would like to connect you with a VA specialist that has the ability to manually underwrite if needed.

      Please send me an email to scott@findmywayhome.com and let me know what State you’re in. I want to try to help you get an answer fast. Will the builder give you time to secure new financing if needed?

      Thank you, and your family for your Service!

      I hope this helps?

  • Christopher Deprey says:

    Hi Scott. My name is Chris. I was recently denied. They said the reason why was I did not have enough time in to qualify. When I out processed I used my saved time I had earned to get out earlier. The reason was because I had medical issues. If I would not have had issues I would have stayed in. I out processed honorable conditions because I wanted to save the money for other soldiers who needed it more then me. I fell about 3 months short. I now have the VA looking at my records because they feel that I should have gotten a stipend. Is there a different way ?

    • Scott Schang says:

      Hi Chris, I am not sure If I’m following you here. Were you short of the service requirements to qualify for your VA housing benefit? If so, you can contact the VA about this, but if they will not issue you a COE (certificate of eligibility) then you’ll have to consider another loan program. Maybe USDA or FHA?

      What State are you buying in? I may be able to introduce you to a lender that has experience with this type of situation that can give you a second opinion.

      Thank you for your Service! I hope we are able to get you pointed in the right direction.

      • Christopher Deprey says:

        I have my COE. I got out on an honorable discharge because if jobs new my knees were bad they wouldn’t hire me so I took the honorable discharge instead. The reason I was short is because they gave me the choice of getting out early because I had leave time I didn’t use. Plus I have a son on disability which was another thing they wouldnt accept. I hope this makes more sense. Thanks. Chris. Also I am in Maine

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