VA DTI Manual Underwriting Guidelines: How to Qualify for a VA Loan with High DTI in 2025
For veterans or active-duty service members aiming to purchase a home, concerns about a high debt-to-income (DTI) ratio may raise questions regarding eligibility for a VA loan. This situation often prompts individuals to seek guidance on their options. The good news? VA loans are among the most flexible mortgage options, even for borrowers with high DTIs.
If the automated underwriting system (AUS) does not approve your loan, it will need to be manually underwritten by a human underwriter.
This guide will break down VA DTI manual underwriting guidelines so you know exactly what to expect in 2025. Let’s get started!
Understanding VA DTI Manual Underwriting Guidelines
When you apply for a VA loan, the lender runs your information through an automated underwriting system (AUS). If the AUS approves your loan, you won’t typically need manual underwriting.
However, if you receive a “refer/eligible” finding instead of an “approve/eligible,” a VA lender must manually underwrite your loan. This happens when:
- Your DTI is too high for an automated approval.
- You have a recent bankruptcy, foreclosure, or short sale.
- You are presently enrolled in a repayment plan under Chapter 13 Bankruptcy with no late payments.
- You have disputed credit accounts that need a manual review.
When it comes to getting a mortgage, manual underwriting involves following stricter rules to ensure you can really afford the loan. One big thing that underwriters check is your DTI ratio. If you’re looking into VA loans, you’ll need to know the VA DTI manual underwriting guidelines, as they help guide the process based on your financial situation.
What is the Highest Allowable DTI for VA Manual Underwriting?
Unlike other loan programs, VA loans do not have a hard cap on DTI ratios. However, if your loan is being manually underwritten, lenders usually prefer to keep DTI at 41% or lower. That said, borrowers with strong compensating factors can go as high as 50-55% DTI.
Here’s how VA DTI manual underwriting guidelines work:
- 31% Front-End / 43% Back-End DTI → No compensating factors needed
- 37% Front-End / 47% Back-End DTI → Requires one compensating factor
- 40% Front-End / 50% Back-End DTI → Requires two compensating factors
- 50-55% DTI → Requires multiple strong compensating factors
Example: You may still qualify if you have a high DTI but strong residual income and three months of reserves!
Calculating DTI for Manual Underwriting
Getting a grip on how your DTI, or debt-to-income ratio, is calculated helps determine if you qualify for a loan. Here are a couple of real-life examples to make it clearer, especially when you’re looking at VA DTI manual underwriting guidelines:
Scenario 1: Veteran with High DTI but Strong Residual Income
John, a retired Marine, earns $5,000 per month. His monthly expenses include:
- Mortgage (PITI): $2,200
- Auto Loan: $400
- Credit Card Payments: $250
- Personal Loan: $150
Step 1: Calculate Back-End DTI
(Total Monthly Debt Obligations ÷ Gross Monthly Income) × 100
= ($2,200 + $400 + $250 + $150) ÷ $5,000 × 100
= $3,000 ÷ $5,000 × 100
= 60% DTI
John exceeds the typical manual underwriting DTI limits, but he has $1,500 in residual income, three months of reserves, and a strong employment history. Because of these compensating factors, his loan is approved through manual underwriting.
Scenario 2: Borrower with 47% DTI but Low Residual Income
Lisa, an Army veteran, earns $4,500 per month. Her monthly expenses include:
- Mortgage (PITI): $1,800
- Car Loan: $500
- Student Loan: $400
- Credit Card Payments: $300
Step 1: Calculate Back-End DTI
= ($1,800 + $500 + $400 + $300) ÷ $4,500 × 100
= $3,000 ÷ $4,500 × 100
= 47% DTI
Lisa’s DTI is within the 47% limit for manual underwriting with one compensating factor. However, she only has $900 in residual income, which is below the required amount for her family size. She needs to lower her DTI or increase her residual income to qualify.
Compensating Factors for High DTI on VA Manual Underwrites
Compensating factors are signs that show lenders you can manage a higher debt-to-income (DTI) ratio. The more of these positive signs you have, the better your chances of getting approved for a loan.
Some common compensating factors, especially under the VA DTI manual underwriting guidelines, that can help borrowers qualify even with a high DTI include:
- Low Payment Shock: If you’re looking at getting a new mortgage, and your monthly payment is only slightly higher than what you’re paying now—less than 5% more—it’s generally considered low risk. This is important to remember, especially when checking if you meet the VA DTI manual underwriting guidelines.
- Three or More Months of Reserves: Money set aside in a savings account to cover mortgage payments if needed.
- Stable Job with a Long Work History: Two or more years at the same job or industry.
- Additional Income Not Used for Qualifying: If you have a second job, rental income, or overtime that isn’t counted in your loan approval but is verifiable.
- Large Residual Income: More disposable income after monthly expenses than the minimum VA residual income requirement.
- Non-Borrowing Spouse Income: If your spouse makes a stable income but is not on the loan, their income can still be considered.
Pro Tip: If your debt-to-income (DTI) ratio is near the limit, consider including several positive factors to boost your loan application. This can help you more effectively meet the VA DTI manual underwriting guidelines.
Find a Lender That Offers VA Manual Underwriting with No Overlays
Are you looking for a lender that offers VA loans without the extra hoops to jump through? Many lenders have added their own rules, making it tougher to qualify. At Gustan Cho Associates, we focus on VA manual underwriting without those added restrictions. This means we follow the standard VA guidelines, making it easier for you. Here’s what we offer:
✅ No minimum credit score needed
✅ No strict debt-to-income (DTI) limits as long as you meet the VA DTI manual underwriting guidelines
✅ Quick pre-approvals and fast closings
💬 Ready to start your loan process? Call us at 800-900-8569, text us for a quicker reply, or email us at alex@gustancho.com!
Final Thoughts: Can You Qualify for a VA Loan with a High DTI?
Absolutely! If you’re trying to get a VA loan and don’t get the thumbs up through AUS, don’t worry! Manual underwriting can still help you get the loan you deserve, even if your debt-to-income (DTI) is high. Remember that you’ll need to meet the residual income requirements. It’s also important to have some good factors that can help your case, and finding a lender who knows about VA DTI manual underwriting guidelines will make a big difference.
📞 Need help? Contact Gustan Cho Associates today, and let’s get you pre-approved!
Your VA Benefits Can Get You Home – Even with a High DTI!
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Frequently Asked Questions About VA DTI Manual Underwriting Guidelines:
Q: What are VA DTI Manual Underwriting Guidelines?
A: VA DTI manual underwriting guidelines are the rules lenders follow when approving a VA loan manually instead of using an automated system. These guidelines help determine if a borrower qualifies for a VA loan based on their debt-to-income (DTI) ratio, residual income, and other financial factors.
Q: What is Manual Underwriting on a VA Loan?
A: Manual underwriting happens when an automated system cannot approve a VA loan, so a human underwriter reviews the application. This process is common for borrowers with high DTIs, recent bankruptcies, or disputed credit accounts.
Q: What is the Maximum DTI for VA Manual Underwriting?
A: VA loans have no fixed maximum DTI, but most lenders prefer 41% or lower. However, with strong compensating factors, borrowers may qualify with a DTI of up to 50-55% under VA DTI manual underwriting guidelines.
Q: What Compensating Factors Can Help me Qualify with a High DTI?
A: Compensating factors are financial strengths that offset a high DTI. These include:
- Low payment shock (new mortgage similar to current rent)
- Three or more months of reserves in savings
- Stable job history (2+ years)
- Extra income not used for qualifying (like side jobs)
- High residual income (money left after expenses)
Q: How Does Residual Income Affect VA Manual Underwriting?
A: Residual income is the amount of money left after paying all major expenses. VA loans require borrowers to meet a minimum residual income threshold, which varies by family size and location. Even with a high DTI, strong residual income can help get loan approval.
Q: Can I Get a VA Loan with a High DTI if I’m in Chapter 13 Bankruptcy?
A: Yes! Under VA DTI manual underwriting guidelines, borrowers can qualify while still in an active Chapter 13 Bankruptcy if they have made 12 on-time payments and received approval from the bankruptcy trustee.
Q: How do I Calculate My DTI for VA Manual Underwriting?
A: DTI is determined by dividing the total monthly debt by the gross monthly income.
Example:
- Monthly debts: $3,000 (mortgage, car loan, credit cards)
- Income: $5,000
- DTI = $3,000 ÷ $5,000 × 100 = 60%
A DTI of 60% may require strong compensating factors for approval. Understanding the VA DTI manual underwriting guidelines is important if you’re looking into a VA loan. These guidelines help lenders see how your DTI affects your loan options and what else they might consider to help you get approved.
Q: What Happens if My AUS Results Say “Refer/Eligible”?
A: When the Automated Underwriting System (AUS) gives a “refer/eligible” result, a person must manually review the loan application for further evaluation. This can happen if you have a high DTI, disputed credit accounts, or recent credit events like bankruptcy or foreclosure. Understanding the VA DTI manual underwriting guidelines is important, as it can help you know what to expect and how to prepare your application.
Q: Can I Qualify for a VA Loan with no Credit Score Under Manual Underwriting?
A: Yes! A minimum credit score is not required to qualify for VA loans. If you lack a traditional credit history, lenders can look at other types of credit data like rental payments, utility bills, and insurance payments through manual underwriting.
Q: How Can I Find a Lender that does VA Manual Underwriting with no Overlays?
A: Many lenders add extra rules (overlays) that make qualifying harder. Gustan Cho Associates offers VA manual underwriting with no overlays, meaning we follow VA guidelines without additional restrictions. Contact us at 800-900-8569 or email alex@gustancho.com for more details! 🚀
This blog about “VA DTI Manual Underwriting Guidelines On VA Loans” was updated on February 3rd, 2025.
