VA DTI Manual Underwriting Guidelines On VA Loans


This BLOG On VA DTI Manual Underwriting Guidelines On VA Loans Was PUBLISHED On February 11th, 2019

VA Loans is one of the best loan programs in the United States.

  • VA Home Loans is only limited for active duty and/or retired members of our U.S. Military
  • Members need to have valid Certificate of Eligibility. Certificate of Eligibility is also referred to as COE
  • VA offers 100% financing where borrowers do not have to come up with any down payment
  • Closing costs can be covered by sellers concessions and/or lender credit
  • It is very possible for borrowers to purchase homes with a VA Loans with zero money out of pocket

Gustan Cho Associates at Loan Cabin Inc. are direct lenders on VA Loans with no overlays.

Credit And DTI Guidelines On VA Mortgages

VA does not have any debt to income ratio requirements on VA Loans that get approve/eligible per automated underwriting system.

  • As long as Fannie Mae and/or Freddie Mac AUS renders an approve/eligible, borrower meets all VA Guidelines
  • If this is the case, why do lenders require no more than 45% to 50% debt to income ratio
  • VA also does not have any credit score requirements
  • If this is the case, why do lenders have different credit score requirements like requiring 620 to 640 credit scores
  • The reason why lenders require debt to income ratios and have credit score requirements is due to their lender overlays
  • Most lenders have overlays on VA Loans
  • Lenders need to meet minimum VA Agency Guidelines but they can have higher lending requirements called overlays

Gustan Cho Associates at Loan Cabin Inc. are direct lenders with no overlays on VA Loans. 

Automated Approval Versus VA DTI Manual Underwriting Guidelines

I have gotten approve/eligible per automated underwriting system on VA borrowers with 580 credit scores and 65% debt to income ratios.

  • VA DTI Manual Underwriting Guidelines are different
  • Debt to income ratios are taken into consideration on VA Loans when it comes to manual underwriting
  • VA and FHA Loans allows for manual underwriting
  • Manual Underwriting is when the automated underwriting system renders a refer/eligible per AUS
  • Or borrowers who are in an active Chapter 13 Bankruptcy Repayment plan needs to be manually underwritten

Also, if borrower has a recent Chapter 13 Bankruptcy discharge and the discharge is seasoned less than 2 years, it needs to be manually underwritten.

VA DTI Manual Underwriting Guidelines For High DTI Borrowers

There is really no set VA DTI Manual Underwriting Guidelines. However, most manual underwriting VA Loans should not exceed 55% DTI. In order to get DTI as high as 55% or higher, borrowers should have two or more compensating factors.

Here are examples of compensating factors:

  • Low payment shock of 5% or less 
  • Large down payment is a compensating factor
  • Three months reserves
  • Manual underwriting requires one month reserves
  • Part time or other documented income that is not used as qualified income
  • Large residual income
  • Non-borrowering spouse
  • Job longevity
  • History of getting promotions and pay raises

General Manual Underwriting Guidelines

Not all lenders allow manual underwriting on VA and FHA Loans. Gustan Cho Associates at Loan Cabin Inc. are five star national direct lenders with no overlays on VA Mortgages. A large percentage of our business is VA Manual Underwriting borrowers.

Here are the basic VA Manual Underwriting Guidelines:

  • Timely payments on all payments for the past 12 months
  • Some lenders will go back timely payments for past 24 months
  • Verification of rent
  • Traditional or non-traditional credit tradelines
  • 2 years out of bankruptcy, foreclosure, short sale, deed in lieu of foreclosure
  • Borrowers in an active Chapter 13 Bankruptcy Repayment plan can qualify after 12 timely payments to their Bankruptcy Trustee
  • No waiting period after Chapter 13 Bankruptcy discharged date

One or two recent late payments is not a deal killer if borrowers have extenuating circumstances. For more information in qualifying for VA Loans with bad credit or manual underwriting, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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