VA Loan Denial

VA Loan Denial And Getting Qualified With Lender With No Overlays

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About VA Loan Denial And Getting Qualified With Lender With No Overlays

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 the borrower’s fault. Borrowers go to the loan officer because he or she depends on the expertise of the loan officer and Lender. The pre-approval stage of the mortgage process is the most important step in the overall mortgage underwriting process.

In this article, we will discuss and cover choosing a lender with no overlays in the event you get denied for a VA loan.

Reasons For VA Loan Denial

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

  • The borrower was not properly qualified by the loan officer
  • The loan officer either did not fully review VA Guidelines
  • Or did not review the loan officer’s mortgage company Overlays
  • The loan officer issued pre-approval without running the file through the Automated Underwriting System and got an approve/eligible
  • The 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

The 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 the 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 biggest investment in their life
  • A home is where lifelong memories are made, where you raise kids, where lifelong friends are made
  • Homebuyers 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 got 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 do not deny 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

VA does not have a minimum credit score requirements

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 a 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
  • The loan officer may think 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 Role And Function Of The VA

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 the lender has followed VA Guidelines
  • If Loan defaults and forecloses, VA will guarantee 25% of the loan amount to cover loss due to foreclosure

Borrowers who recently got a VA Loan Denial, the chances are because they were not properly qualified by the loan officers and due to their Lender Overlays. Please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at Gustan Cho Associates 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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