In America alone, about 79% of veterans own their homes compared to 63% of non-veterans. While one in every five Americans is a veteran, we found that their homes were purchased using a Veterans Affairs (VA) loan.
These numbers may seem more accessible for veterans to buy and fully own a new home. However, this is not the case for every veteran. Now, if you’ve been turned down for or refused a VA loan, continue reading.
The Challenges of Qualifying For a VA Loan
A VA loan is a mortgage that the government insures. This type of loan is eligible for application for military personnel, veterans, and surviving spouses of those impacted by tragic circumstances.
Although this could be granted for the aforementioned groups of Americans, a VA loan is not simply issued directly. One must go through the process of registering with trusted lenders before approval. Then, an underwriter must verify your eligibility and submit the necessary documents.
The VA Loan Eligibility Requirements
A borrower’s duty status and service history may determine their eligibility for a VA loan. With a lender, you are required to round up a Certificate of Eligibility (COE) based on your duty status and service history, which you may apply for online. Additionally, you must also meet the specific conditions listed below:
Show Your Ability to Repay The Loan
This usually necessitates two years of full-time employment and monthly obligations totaling less than 40% of gross monthly income.
Show Your Debt-to-Income Ratio
If your debt-to-income ratio exceeds 41%, you may be asked to make a down payment or fulfill additional financing requirements.
Show That You Possess a High Credit Score
While the VA loan program does not have a minimum credit score requirement, each partner lender may have one.
It’s also important to note that previous bankruptcies or foreclosures do not exclude you from being approved for a VA loan. At once, check with your VA loan provider to see whether you satisfy all of the requirements.
The Rejected VA Loan Application
Despite best efforts, lenders may still make errors or omissions when using computer systems to analyze your application. This may be the cause of your rejected VA loan. Furthermore, inexperienced lenders may commit unintentional VA loan errors from time to time. If your loan application was denied, the lender might have utilized automatic underwriting rather than manual underwriting.
Many lenders utilize automated underwriting to help applicants by streamlining laborious processes, although automation is more susceptible to ignoring human errors. The examination of your data by a computer program is what automatic underwriting implies. Based on a predefined definition, the automated software determines whether to approve or reject your application.
Manual underwriting or having a real person underwrite your mortgage, on the other hand, is preferable in some cases. If your VA loan application is denied, you may request manual underwriting.
Why Are Veterans Affairs Loans Being Rejected?
In rare cases, an automated underwriting computer algorithm may be unable to evaluate the given data correctly. The application does not have all of the information required to assess it. This can happen for a variety of reasons, ranging from minor errors to credit card problems.
Another cause for a VA loan denial is a history of credit problems, such as unresolved concerns, or if you have been through bankruptcy or foreclosure, the automatic system may deny your application.
Although, when it comes to credit issues, the VA is quite lenient. Unlike traditional loans, it will take a borrower’s rental history into account when evaluating creditworthiness. In the case of VA loans, automatic underwriting may reject the application, but manual underwriting may accept it.
What to Do after a VA Loan Rejection
The first step is to figure out why. Perhaps if you have a low credit score, you can improve it and reapply later. In other cases, you must also double-check if you meet all the requirements. If, however, your application was automatically rejected, ask for your application to be examined by a manual underwriter. You may need to look for a different lender, as not all lenders can or will manually underwrite mortgage loans.
If manual underwriting is also not permitted, you must manually determine your eligibility. Your application may be refused if your lender does not allow for manual underwriting on VA loans.
Even if your VA loan application is denied, you may still consider other choices to purchase your home. At this point, see to it that you seek the services of a trusted lender and talk to a mortgage broker. With professional service and knowledge, you will be thoroughly guided into your VA loan application process.
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