VA Loan Denial And Getting Qualified With Lender With No Overlays

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VA Loan Denial And Getting Qualified With Lender With No Overlays

This BLOG On VA Loan Denial And Getting Qualified With Lender With No Overlays Was UPDATED On November 7th, 2018

There should be no reason why anyone should get a VA Loan Denial.

  • Unfortunately, there are many borrowers who either get a last minute mortgage loan denial or major stress during the mortgage process
  • There is one reason and one reason ONLY for a last minute VA Loan Denial or stress during the VA mortgage process
  • The loan officer did not properly qualify the Veteran for the VA Loan
  • Last minute VA Loan Denial is not borrowers fault
  • Borrowers goes to the loan officer because he or she depends on the expertise of the loan officer and Lender
  • The pre-approval stage of mortgage process is the most important step in the overall mortgage underwriting process

Reasons For VA Loan Denial

Here are the two reasons for last minute VA Loan Denial:

  • Borrower was not properly qualified by loan officer
  • Loan officer either did not fully review VA Guidelines
  • Or did not review the loan officer’s mortgage company Overlays
  • Loan officer issued pre-approval without running file through Automated Underwriting System and got an approve/eligible
  • Loan officer may have gotten an approve/eligible and assumed that the borrower qualifies for a VA Loan
  • But the lender has overlays on VA Loans
  • Loan officer did not review all of the documents carefully such as the following:
    • two years tax returns
    • or thoroughly review the borrower’s credit reports

Again, there should be no reason for a last minute VA Loan Denial or stress during mortgage process if the loan officer properly qualified borrowers.

VA Loan Process

Buying a new home, especially for a first time home buyer, is the all time American Dream:

  • Something any home buyer should be proud of
  • A home is most American’s single most biggest investment in their life
  • A home is where lifelong memories are made, where you raise kids, where lifelong friends are made
  • Home buyers who have a VA Certificate of Eligibility have something other home buyers do not have
  • VA Loans is one of the greatest benefits they can have where others do not have

Great Benefits Of VA Home Loans

VA Loans offer the following:

  • Only available to the select few. Offered only to Veterans of the United States Military who has proudly served our country and gotten an honorable discharge
  • Has been awarded a valid Certificate of Eligibility also commonly referred as a COE
  • No down payment required
  • 100% Loan To Value
  • Offers 100% financing
  • No closing costs required with a sellers concessions and/or lender credit
  • VA Loan Limits are $453,000
  • Loan limits are higher in high cost areas throughout the United States
  • Easy streamlined process to qualify for VA Loan
  • Very loose and lax guidelines
  • VA does not have credit score requirements or debt to income ratio requirements
  • One of the lowest mortgage rates out of all loan programs
  • There is no mortgage insurance premium

Again, no Veteran should get a VA Loan Denial. We will discuss what you should do if you get a VA Loan Denial.

Why Did You Get A VA Loan Denial?

If you gotten a VA Loan Denial or are going through a major stressful Loan Process, find out the reason.

  • Lenders are private companies
  • They only get paid once they close on a Loan and not denying them
  • Most Lenders want to approve and close loans
  • However, most Lenders do have Overlays
  • Just because borrowers meet the minimum VA Guidelines does not mean they qualify with that particular Lender
  • Maybe this may be the case

Typical Lender Overlays By Mortgage Companies

Here is a typical case scenario of a VA Loan Denial:

VA does not have a minimum credit score requirements:

  • Most VA Lenders have overlays on credit scores of 620 to 640 FICO
  • VA does not have debt to income ratio requirements
  • Most Lenders have overlays on debt to income ratios where they can cap it at 41%
  • I recently had an approve/eligible per Automated Underwriting System on a VA Loan:
    • Where the borrower had a 582 FICO credit score
    • 58% debt to income ratio
    • We are going to do this deal
    • However, most VA Lenders may not do this deal
  • Loan officer may thought it would have been fine to submit a file with an approve/eligible per automated findings
  • But may not have realized of their lender overlays on VA Loans

The United States Department of Veteran Affairs is not a lender:

  • Department of Veterans Affairs does not originate, fund, or service VA Loans
  • The U.S. Department of Veteran Affairs guarantees VA Loans originated and funded by lenders in the event if homeowners defaults on his or her VA Loan
  • This holds true as long as lender has followed VA Guidelines
  • If Loan defaults and forecloses, VA will guarantee 25% of loan amount to cover loss due to foreclosure

Borrowers who recently gotten a VA Loan Denial, the chances are because they were not properly qualified by loan officer and due to their Lender Overlays. Please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates at Loan Cabin Inc. has no overlays VA Loans. We just go off the automated findings. We are available 7 days a week, evenings, weekends, and holidays to take your VA mortgage inquiries.

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