VA loans are considered one of the best types of home loan available with no down payment required, low funding fees, no private mortgage insurance, and competitive rates. Available to veterans, active military members, and military spouses, VA loans may seem to have easy eligibility standards, but many VA loan applications are still denied. The following are the most common reasons for a denied application for a VA home loan.
No Certificate of Eligibility (COE)
Before applying for a VA loan, the first step is getting a Certificate of Eligibility which gives the borrower the right to buy a home with a VA loan. This form proves to a lender that the borrower is qualified to receive a VA loan. Failing to get a COE is one of the most common reasons a VA loan application is denied.
Changes in Credit Score
A borrower’s credit history is checked during the initial application process, but it’s checked a second time during the underwriting process to make sure nothing has changed before the loan is closed. Even small changes can bring up red flags with lenders. It’s a common mistake for borrowers who have been approved for a mortgage to take out new loans or accrue new debt to buy new furniture or a car, for example. All new debts can affect the debt-to-income ratio and the borrower’s ability to get a mortgage. It’s always best to wait until the loan closes to take on more debt.
While most issues are easy to fix, mistakes that slip through to underwriting can delay the mortgage approval and even cause a loan to be denied. Unverifiable income, any debts that were not disclosed, or other minor mistakes on the application can cause problems later in the loan process.
The time between applying for a loan and the loan closing is not the time to change jobs. Employment should remain consistent throughout the process, and any changes that do occur should be discussed with the loan officer. Depending on the change to your employment, the lender may request new documentation such as a more recent pay stub, a title change letter, an offer letter, or a written verification of income from the employer. Income from a new employer may be considered unreliable by an underwriter, especially if the new job is in a different field.