What To Do When You Get VA Loan Denial


What To Do When You Get VA Loan Denial

This BLOG On Advice On What To Do When You Get VA Loan Denial Was Written By Gustan Cho

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 the not the VA Loan borrowers fault. The VA borrower goes to the loan officer because he or she depends on the expertise of the loan officer and the VA Lender that the loan officer works for. The pre-approval stage of the VA mortgage process is the most overall mortgage underwriting process. 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 the VA Guidelines or did not review the loan officer’s mortgage company VA Lender 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 lender overlays on VA Loans
  • Loan officer did not review all of the documents carefully such as 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 the VA mortgage process if the loan officer properly qualified the VA borrower.

VA Loan Process

Buying a new home, especially for a first time home buyer, is the all time American Dream and 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 your kids, where you make lifelong friends. Home buyers who have a VA Certificate of Eligibility have something other home buyers do not have. A VA Loan is one of the greatest benefits that you can have where others do not have. 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 and has been awarded a valid Certificate of Eligibility also commonly referred as a COE
  • No down payment required. 100% Loan To Value. VA offers 100% financing
  • No closing costs required with a sellers concessions and/or lender credit
  • VA Loan Limits are $417,000 and higher in high cost areas throughout the United States
  • Easy streamlined process to qualify for VA Loan
  • VA Loan have very loose and lax guidelines
  • VA does not have credit score requirements or debt to income ratio requirements
  • VA Loans has one of the lowest mortgage rates out of all loan programs
  • There is no mortgage insurance premium with VA Loans

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 VA Loan Process, find out the reason. Lenders are private companies and only get paid once they close on a VA Loan and not denying them. Most VA Lenders want to approve and close your loan. However, most VA Lenders do have VA Lender Overlays and just because you meet the minimum VA Guidelines does not mean that you may qualify with that particular VA Lender. Maybe this may be the case. 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 FICO or 640 FICO
  • VA does not have debt to income ratio requirements
  • Most VA 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 and a 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, VA, is not a mortgage lender and does not originate, fund, or service VA Loans. The U.S. Department of Veteran Affairs guarantees VA Loans originated and funded by private lenders in the event if the Veteran homeowner defaults on his or her VA Loan as long as the lender has followed VA Lending Guidelines. If the VA Loan defaults and forecloses, the VA will guarantee 25% of the VA loan amount to cover their losses.

If you have recently gotten a VA Loan Denial, the chances are because you were not properly qualified by your loan officer and due to your VA Lender Overlays. Please contact me at 262-716-8151 or email us at gcho@gustancho.com. The only requirement we have is a 580 FICO credit score on VA Loans and 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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