This article covers getting a VA loan denial due to overlays and qualifying with a different lender. In this article, we will cover the VA agency guidelines, what are VA lender overlays, VA agency guidelines versus overlays, and why Gustan Cho Associates can approve VA loans when other lenders can’t. VA loans are hands down the best loan program in the nation. Only eligible veterans can qualify for VA loans. There are no minimum credit score requirements on VA loans.
VA mortgages are the only loan program that does not have a maximum DTI cap as long as the borrower has an AUS approval. There is no maximum loan limit on VA loans.
VA loan overlays are additional lending requirements that some lenders impose on top of the standard VA loan requirements set by the Department of Veterans Affairs (VA). Lender overlays can vary from lender to lender and are often put in place to mitigate risk or meet specific internal lending criteria.
Not All VA Lenders Have the Same VA Lending Requirements
Borrowers who get a VA Loan Denial Due To Overlays can look for a lender with no overlays on VA loans. Most borrowers who get denied for VA loan denial due to overlays may not qualify with that lender but may meet all VA Guidelines. They may qualify for a VA Loan with a direct lender with no overlays on VA loans if they get denied for VA loan denial due to overlays.
Not All Lenders Has The Same VA Lending Requirements
Not all lenders have the same VA mortgage guidelines. All lenders will require borrowers to meet the minimum VA guidelines. However, lenders may require higher credit and income standards that are above and beyond the minimum VA agency guidelines. This is why not all lenders have the same VA lending requirements.
Gustan Cho Associates is a mortgage company licensed in multiple states. We have no lender overlays on government and conventional loans.
Gustan Cho Associates has over 220 wholesale mortgage lending lenders. Most of our wholesale lenders have no lender overlays on VA loans. Over 80% of our borrowers are folks who could not qualify at other lenders due to their mortgage overlays. In this article, we will discuss VA loan denial due to overlays. We will discuss qualifying for VA loans with a mortgage banker with no mortgage overlays.
Understand the Overlays
If your VA loan application was denied due to overlays, here are some steps you can take. First, try to understand the specific overlays that the lender has in place. This could include higher credit score requirements, additional income documentation, or restrictions on the type of property you can purchase.
Contact the lender who denied your application and ask why the overlays led to your denial. They should be able to provide information on which specific overlays were the issue.
Not all VA lenders have the same overlays. If one lender denied your application, exploring other lenders with more lenient requirements or different overlays may be worth exploring. If the overlays are related to credit score or other financial factors, improve your credit score and financial stability. This may take some time, but it can make you a more attractive borrower. Some lenders specialize in VA loans and may better understand VA-specific requirements. Consulting with such specialists could be beneficial.
VA Automated Underwriting System Versus Lender Overlays
All lenders will enter the borrower’s file to Fannie Mae and/or Freddie Mac’s Automated Underwriting System (AUS) for automated underwriting approval. The AUS will render the following decisions of the borrower within a matter of seconds of analyzing the borrower’s credit, income, assets, FICO, payment history, public records, and other information on the borrower’s 1003 and credit report:
- approve/eligible per AUS
- refer/eligible per AUS
- refer/with caution per AUS
While VA loans are an excellent option for eligible veterans, consider exploring other types of home financing, such as FHA or conventional loans, if you continue to face difficulties with VA loans.
Appeal the Decision on VA Loans Denied Due To Overlays
If you believe the denial was unjust, you can appeal the lender’s decision. Provide any additional documentation or information that supports your creditworthiness and ability to repay the loan.
Mortgage brokers have access to multiple wholesale mortgage lenders and can help you find a lender more likely to approve your VA loan application based on your unique financial situation.
Remember that each lender has its policies and overlays, so finding one more willing to work with your specific circumstances is possible. Additionally, staying well-informed about your credit and financial situation can help you improve and increase your chances of loan approval.
Automated Findings Per Automated Underwriting System
If the borrower gets an approve/eligible per AUS, that means they fully meet all VA guidelines. Gustan Cho Associates has no overlays on VA loans. We just go off by the AUS FINDINGS and have ZERO OVERLAYS. Most lenders will not just go off the AUS FINDINGS, but they will have their separate individual additional VA lending requirements called lender overlays.
VA loan denial due to overlays is mainly due to the lender’s individual overlays. Most borrowers who get VA loan denial due to overlays qualify for a VA loan with a different lender with no overlay.
Refer/eligible means that the Automated Underwriting System cannot determine an automated approval. The file needs a human mortgage underwriter for further review (manual underwriting). Refer with caution per automated underwriting system means that the borrower does not qualify for a VA loan.
Examples of Typical Overlays
It will be impossible to cover all the lender overlays in this blog. However, we will touch on common lender overlays. The Department of Veterans Affairs does not have any minimum credit score requirements. VA made it possible for our active and retired members of our U.S. Armed Forces to qualify for VA loans with very lenient credit and income requirements.
Lenders with Lender Overlays on VA Loans
Many lenders may require a 620 to 640 FICO credit score even though VA does not have a minimum credit score requirement. The VA also does not have a maximum debt-to-income ratio requirement. Most lenders will cap VA DTI to 41% to 50%. Gustan Cho Associates has closed countless VA loans with over 60% DTI and credit scores under 600 FICO. Another common overlay by lenders is they require outstanding collections and charge off accounts to be paid. The Department of Veterans Affairs does not require borrowers to pay outstanding or charge off accounts to qualify for VA loans.
VA Manual Underwriting
Gustan Cho Associates can manually underwrite VA loans up to a 60% debt to income ratio. Borrowers can have late payments in the past 24 months as long as the late payments have been due to extenuating circumstances. We have an investor who is very understanding when it comes to extenuating circumstances with veterans. As long as the extenuating circumstances are not due to total disregard to credit, we can go to bat for veterans.
Qualifying for VA Loan With a Lender With No Overlays
Borrowers with a recent VA loan Denial Due To Overlays can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is a mortgage company with no lender overlays on VA Loans. We have zero lender overlays on government and conventional loans. We just go off automated findings of AUS. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
