VA Manual Underwriting – Ch 13 BK and Short Sale
VA manual underwriting success stories are something that we love around here!
VA loans are a little bit different from other types of financing primarily due to the flexibility that underwriters and the Veterans Administration have for manually underwriting these loans.
A manually underwritten VA guaranteed loan basically means that if you are unable to get an automated approval, for whatever reason, an underwriter has the ability to go through the file and try to make it work.
The Veteran’s Administration is also very helpful in providing guidance to underwriters about what is acceptable, and what will not be acceptable in order to guarantee the VA loan.
I wanted to tell this story, because this is a perfect example of the kinds of problems that you are able to solve when you’re working with the right loan officer.
Find My Way Home is a talented network of experienced and innovative loan professionals that loves to help good people with hard loans.
Mia Schultz is a member of our expert lender network. Based in Illinois, Mia has multiple licenses and is able to help borrowers in many other States.
As the very first expert lender partner, this story by Mia does not really surprise me. This level of complexity and expertise seems to be somewhat of a specialty for this special loan officer.
When I asked Mia about recent VA manual underwriting heroics, she instantly recalled this recent success story.
It all started with an email that Mia received. Here’s the email:
My husband and I filed Chapter 13 bankruptcy in December of 2010 because we were afraid of losing our home because we could NOT afford the adjustable rate increase of 10.25 %.
After fighting with Household/HFC Beneficial for over 8 months , they finally agreed to a short term modification which reduced our rate to a 5.25%, shortly thereafter, we filed bankruptcy.
This filling kept our current rate at a 5.25% which was and is very affordable for us. During the initial refi with HFC, they also inflated the property value which increased our loan amount. The property is now NOT worth what we owe.
Fast forward. We were just recently discharged out of bankruptcy and HFC wasted no time increasing our interest to a 10.25%. an increase of over $600.00 a month.
We have tried to refi, but no one would accept us because of the recent discharge and HFC has denied us of a hardship/modification.
Our mortgage was left out of the bankruptcy and we have never been late or missed a payment. We are afraid that we will soon be back in the same situation, an unaffordable loan and owe more than the home is worth.
Is there any help you can give us? (We live in Louisiana)
To summarize, there are 3 main challenges that this family faces:
- Chapter 13 Bankruptcy – Discharged for 2 months (automatic manual downgrade)
- Own a home that is upside down
- Have student loans that are deferred
Now, let’s see what Mia came up with.
The VA Manual Underwriting Solution
“She was turned down by several other lenders before she found me in her last desperate attempt”, Mia says.
I’m going to do my best to break down for you what Mia had to do for this family to become homeowners again. There are a lot of moving parts, but I’ll try to keep it simple.
Initially, the family was trying to refinance to get out of the horrible interest rate that they were locked into by their previous lender.
Refinancing was not an option because the home was worth less than what they owed.
Mia’s solution? “I suggested she do a short sale and move to a new home. VA does not require a waiting period for short sale nor for a Ch13 bankruptcy”
The family was shocked that this was even an option. She had always wanted to get out of her neighborhood but thought she was stuck.
Mia worked with them for 6 months.
When I asked her what took 6 months, she offered this as an example of what kind of fight she had on her hands:
“I went through many tears, and stress, and denials, and suspensions. To add to the stress, she had her daughter’s wedding (she sent pics), she had to obtain/ finalize legal custody of a family member, she and her husband had messed up student loans reporting and so much more. Each week brought a new challenge.”
Now, here’s where this really gets amazing. They were able to do a short sale, and there was no waiting period before qualifying for a VA loan. They were able to sell the home to a Veteran as well (and Mia was able to help them with the VA financing).
If all that wasn’t crazy enough, they also had deferred student loans that they had to begin making payments on.
Mia was able to document everything, show that they continued to make on-time payments and were financially stable after the Chapter 13, and get the underwriter to see the “big picture” here.
The big picture was essentially that this family was doing the best they could with what they had, and there was little to no risk that they would miss payments on their new VA loan.
Don’t Take No For an Answer
This wasn’t an easy loan to do. I don’t know if many people understand that most loan officers like Mia only get paid once your loan is done. We don’t get paid for trying.
There are only 3 reasons why a lender would turn you down:
- You do not qualify at this time
- The loan officer is not experienced with your situation
- Your loan is not easy enough
I understand that my perception may be skewed because I talk to so many folks that have been turned down and have found this site. That said, most of the folks we work with fall under reasons #2 and #3.
You would be shocked at how many loan officers out there will tell you that you do not qualify, when in fact they just don’t know that you qualify.
As far as your loan not being easy enough, that’s a special group of loan officers that choose to not help. That’s a rant I will spare you from for now.
Yes, Mia makes money when she completes a loan for someone but in situations like this, it’s not about the money. She probably made less than minimum wage to help this family out when you look at the hours it took to get them there.
Loan officers like Mia, she loves a challenge, and she loves to help people. Sometimes the greatest reward is kind word.
Here’s what the family sent to Mia shortly after closing:
We are finally settling into the new home. It still amazes Roderick and I that we are actually here. I miss our conversation and your laugh but I just wanted you to know how truly grateful we are for your wisdom, knowledge, patience and diligence. You are truly a gold mine and anyone that runs across your path can consider themselves Blessed!!”
Protect Yourself with a Plan B
If you are applying for a VA loan, talk to your loan officer about manual underwriting first. If your lender is not willing or able to offer manual underwriting on VA Guaranteed loans, you may be told you’re not approved when in fact, you could be.
It’s much more work for the lender and the underwriter, and may require much more documentation from you, 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.
Getting Your Questions Answered
All lenders are not created equal. Most of the readers that find this site because they’ve been researching solutions to challenges, and have been told 10 different things by 10 different loan officers.
We’ve created this resource to help you sift through the endless opinions and articles that may, or may not directly answer your question correctly.
There are several ways to ask questions, and get expert opinions on this website.
- Submit a Question: On the bottom of this page, you’ll see a prompt that allows you to ask questions. These questions come directly to me and are answered very quickly.
- Leave a Comment: Below every article is the option to leave a comment or question. We see these comments and questions in real-time and the always answered, usually pretty quickly.
In addition to researching your questions and providing you with expert advice, I can also introduce you to a lender friend that I know has experience with your specific situation and can help.