The VA loan can be a great way for veterans to purchase homes with a very small down payment and very favorable interest rates. However, it can be challenging to actually get approved for this sort of loan. Here are some tips homeowners can follow if their VA loan application has been denied.
Look Into the Reason Behind the Denial
The first thing anyone should do after being turned down for a VA loan is question why it happened. In many cases, the reason an application was denied might be something simple like a missed payment, someone stealing the borrower’s identity and opening a delinquent account, or a paperwork mistake. Clearing up the problem that was keeping the loan from going through may be enough to get a person approved.
Get Manual Underwriting
Most VA loans are done through automated underwriting, where a bunch of numbers are put into a computer that then determines whether or not you are qualified. However, this type of underwriting does not always give the full picture. In these cases, it may be a good idea to ask a lender to manually underwrite your application. This typically requires the applicant to provide a lot more documentation, but the outcomes can be more favorable.
Talk to Other Lenders
VA loans are a little unusual because they come with very reduced qualifications, but many lenders will add their own requirements called overlays. For example, a VA loan does not have a minimum credit score requirement. However, many lenders may add an overlay that sets the credit requirement around the mid 600s. Therefore, it may be helpful to check in with other lenders and see if they have less stringent overlays.
Look at Another Home
One of the trickiest parts of getting a VA loan is that there are certain requirements the property has to meet to qualify for the loan. The reality is that borrowers may need to be more flexible on their home purchases. Minor issues like lead-based paint can be enough to get a loan denied. Though it is tough to give up on what seems like a dream home, it may be advisable in some situations.