VA Home Loan Underwriting Guidelines and Process

VA Home Loan Underwriting Process

So what is the VA home loan underwriting process and guidelines? If you’ve ever looked into taking out a home loan, you’ve probably heard the term “underwriting.” What does underwriting mean for you and for your home? And how can you as the borrower affect its outcome? These are the questions we’ll tackle today in this article.

VA Underwriting Guidelines?

The VA home loan underwriting process is the longest and most intensive stage when it comes to mortgage lending. It’s the stage in which the real decisions are made: underwriters ultimately determine if you’re going to be approved for a loan or rejected. They look closely at your credit and assets to determine whether you are likely to pay back the loan; they make sure the originating loan officer packaged the file properly and that nothing is missing; and they’re also in charge of ensuring the property title is clean and that the loan meets all VA guidelines regarding income, VA loan credit requirements, debt, down payments, equity, and compensating factors. Essentially, underwriters are there to make sure you are a good investment for the lender to make and that all the rules are being followed. It’s especially important for VA lenders to follow the rules because the government guarantees a portion of all their loans. If you can make it past the underwriter, you’re pretty much home free.


The Three Typical Underwriting Outcomes

In general, there are three ways the underwriting process can go. First, your loan could be approved, but in need of tweaking. At this point, the lender will ask you for some more documents and see to smaller errors or clarifications on the file. Second, underwriters could clear your loan to close (CTC) immediately. This is rare, but it does happen. The third outcome, then, is rejection.

However, it’s more common for underwriters to offer a conditional approval instead of outright denying you the loan. We’ll explain what conditional approvals are a little later.


General Underwriting Requirements

Here’s a bare-bones list of what underwriters are looking for when they evaluate your loan file:

  • Sufficient VA entitlement
  • Eligible purpose behind the loan
  • Occupancy requirements are met
  • Low credit risk
  • Steady income, able to repay the mortgage
  • A residual income (the income left over after your debt payments are made) of 41 percent or higher
  • A suitable debt-to-income ratio
  • No judgment liens
  • Verification of employment (VOE)
  • No large or otherwise unusual bank deposits
  • Clear CAIVRS numbers, meaning you have no outstanding government debt
  • 12 months of punctual and complete payments (some lenders will allow 30 days delinquency)


Underwriting Process

The workflow of a VA loan looks like this:

First, your loan is originated by a loan officer. Loan officers establish the value of the home, order a home appraisal, obtain the needed title work, document your income, and acquire the proper disclosures from the VA, among other necessary items.

After this, your information is sent to a processor, who verifies it all and compiles it into your loan file. Your loan file contains nitty-gritty information, such as property details, the loan request, and your financial profile. Once the processor is done, the file then goes to the underwriter.

Underwriters must analyze your loan file based on the three C’s: Credit, Capacity, and Collateral. You must be a reasonably low credit risk, with a payment history that proves you can make payments on time and in full. You must have the capacity—such as the income, debt, reserves, and employment—to pay back the loan. And the third C, collateral, refers to the value of the home. If the underwriter is satisfied with your loan file in relation to the three C’s, you’ll likely be approved.

All in all, this process can take up to 60 days, given the number of underwriters available and how big or complex your file is. As cold and calculating as underwriters can seem, they really are on your side: they want to save everyone the pain of unwisely lending/buying a home. Their job is incredibly important to the success of both borrower and lender.


Manual vs. Automated Underwriting

Up until now, we’ve described the underwriting process as it is performed by human beings, but in our increasingly digital world, lots of underwriting duties have gone to computers. The Automated Underwriting System (AUS) is used by some lenders to approve or deny loan applications. AUS’s are usually flexible when evaluating your file. For instance, an AUS will be more forgiving when it comes to the age of your credit lines or your debt-to-income ratio (DTI). Manual underwriters will consider credit lines younger than 2 or 3 years to be a higher risk than those older than 2 or 3 years, while this wouldn’t phase an AUS. And while an AUS might approve a borrower with a DTI as high as 55 percent, underwriters themselves may stick to the conventional 41-45 percent maximum.

But sometimes the approval of a loan is more complicated than the numbers suggest. Sometimes an AUS will turn away a borrower who a manual underwriter would approve. In this case, lenders may order a manual underwrite of your file as a second opinion. Specific issues on your application, such as foreclosure or bankruptcy, benefit from human reasoning. And today, many lenders use a combination of manual and automatic underwriting to make sure borrowers are getting the fairest treatment.

If you’re ever denied a loan after only being evaluated by an AUS, request a manual underwrite from your lender. It may change things for you!


Conditional Approval

Earlier, we mentioned conditional approvals as one of the three outcomes of underwriting. Here’s what a conditional approval entails:

It’s often the case that before a final approval can be made on your loan, certain conditions will need to be met. All this means is that, for the most part, your loan is good to go, but there are a few little things that need to be addressed before you can close. So don’t panic if you get this response from an underwriter. Lots of borrowers get it; in fact, it’s very rare to just sail through the underwriting process with no hiccups at all.

Most of the time, conditional approvals have to do with documentation: either a certain document is missing, or the underwriter needs more proof of something mentioned in the file. Maybe the underwriter wants to see additional pay stubs or tax returns, or maybe they’ve already been ordered and you’re just waiting for them to arrive. If there are certain anomalies on your file, such as periods of extreme debt or extreme wealth, you’ll need to explain those thoroughly and assure the underwriter that you can be as predictable and consistent in your finances as possible. Borrowers usually make these sorts of explanations in the form of letters.


Underwriting and the Interest Rate Reduction Refinance Loan (IRRRL)

The Interest Rate Reduction Refinance Loan (IRRRL) or VA Streamline refinance loan is one of our favorite refinance options here at Low VA Rates. Why? Because it’s effective, fast, and easy. There’s little to no underwriting required when you take out an IRRRL, meaning no second home appraisal, no new Certificate of Eligibility, and no new credit underwriting package. Loan officers can just recycle the underwriting that was done on your file when you took out your original loan.


What Can You Do as the Borrower?

Even though it’s the underwriter who decides whether or not to approve your loan, you can still have a positive impact on the process by doing your very best as a borrower. Here are some tips for working with your loan officer and underwriter:


  • Make sure all your forms are complete and valid! Turning in half-completed or ineligible documents will only delay the underwriting process and create headaches for everyone involved.
  • Be honest! Don’t try to trick the underwriter. Remember, their job is to make sure you don’t take on a loan you won’t be able to handle.
  • Submit documents in a timely manner. The sooner the underwriter can get to work on your file, the sooner you could be approved and potentially close on your home. Additionally, and perhaps more importantly, the sooner you turn in your documents, the sooner any errors can be found and dealt with. Some mistakes can push the process back weeks, so you want to get them addressed as early on as you can.


Preparing Veterans for Success

At Low VA Rates, we strongly believe in educating our borrowers instead of keeping them in the dark about things that are going to massively affect their financial futures. That’s why we write articles like this one: we want to bring you into the loop and make sure you have all the information necessary to make informed intelligent decisions. The VA loan process can be complex and overwhelming to the first or even second-time borrower, but our well-trained loan officers are ready and able to help you every step of the way. To learn more about the many processes and requirements that make up a VA loan, visit the rest of our website or give us a call at 866-569-8272.  We thank you for your service!

36 thoughts on “VA Home Loan Underwriting Guidelines and Process

  1. My VA Mortgage loan has been approved by the underwriter with conditions. We’ve submitted the requested documents that will hopefully satisfy these conditions. We’re nervous and anxious because we really want this house. Didn’t hear anything today, so I guess we’ll have to wait ’til after Labor Day. Ready for this process to be over.

  2. I have been going through this process since early June. I feel the process was done backwards. I was approved for a VA loan. They started building the house without asking for information. I kept inquiring about when will they need information. I even askd about what should the status of my account look like. I ask if I should keep it higher than what I normally keep it. She says, ” oh don’t worry about it, just live as normal.” As the house gets to it’s final stages, still no information is requested. Then a monkey wrench is thrown. The builder and the banker are fighting. Here is is Dec and I am still going through the process. Finally, after the house is finished and we’ve done the walk through, the request information. What is that all about? I am excited and now scarred at the same time. I think it is torture to let us watch the house being built to our needs with special requests and now we are on eggshells waiting on an answer. This has been a 6 mos experience. I am very very tired and disappointed. I can’t wait till it’s over to voice my opinion. I am so tired that even if the loan finally is approve, I don’t know if I would be able to enjoy it for the first year due to the stress we went through.

  3. I had a VA loan come back from underwriting. It was approved with conditions, one of which was for us to provide a letter stating how much we pay in childcare. When it was submitted to underwriting it came back denied for the loan. They said that the childcare put our debt to income ratio over the limit for a VA loan. We were furious! How is it that an active duty soldier, who has a current VA mortgage that has never been late for 2 years can not get approved for a new VA mortgage, once the sale of the current one is final. It’s rediculous!

  4. romanza,
    call 888-657-2848 and ask for eric kandell. I will help you get approved

  5. I am going through my loan process right now with VA Morgage Center. This whole process has been a big pain. We should have closed over a month ago but my broker was dragging his feet and now underwriting is doing the same. They said that they have everything that they need but I have been waiting 3 weeks for it to go to Docs. If you are reading this, do not go with VA Morgage Center, there are other lenders that do VA loans, think about going through a lender for your loan. My lender is Wells Fargo, if you don’t go directly through them for your loan, then things like reduced fees for PCS moves and Closing Guarantee does not apply to you.

  6. wow i thought i was the only one..well we were on to the last step under writing with the va we got denied because we don’t have enough assets in the back we have about 10 000 dollars saved up . this is ridiculous to me that’s the whole point of a VA 0 down loan for vets to be able to buy a home and not worry about having to save a boat load of money to put down . so now we are stuck and do not know what to do ! husband is a deployed, great kick in the pants to keep motivated in Afghanistan they work their buts off and then VA denies a deployed solider makes me furious. so pretty much now if you dont have money in the bank you will get denied , we don’t want to loose this house . its crazy to me a VET should be approved regardless they deserve every benefit.. so now my husband will never be able to use his VA mortgage benefit after 4 deployments!!

  7. We have been going through the same thing for the last 5 months. We originally were going through USAA, our loan officer told us everything had been approved, we just needed to add a small deck to the back door and we were good. We went and got everything to do it 2,000.00 in lumber, and then 2 days before our scheduled closing date, when my husband called him to ask a question, he told us that our loan was denied! I don’t understand how they could do this! We have all the approval papers, and even emails from this guy telling us that everything was approved and then all of the sudden he says it was denied because of the acres. Thats the first thing we checked on and they said it was fine. Now we are trying to go through another bank, it’s in the underwriting process. I pray that everything goes through, we sold the house we currently live in, and have to be out within 2 weeks!! We have 2 small children and we really do not know what to do!! These veterans should not have any problems getting their va loans, that’s what they are there for!

  8. Bethany,

    Very interesting situation…Was it a credit problem? are you trying to purchase a home or refinance?

  9. Reading this makes me believe our loan won’t happen at all. For the last 3 weeks we have been jerked around by the underwriter with one more condition all the time…just one more letter, just one more document. My husband and I have had it and today we are flipping things on them. If they can’t give us final approval today we are taking our business somewhere else. The pain these underwriters put you through is WAY over the top. We have a very high credit score and make plenty to afford the loan. They made us too give a child care letter and even had to have notarized letter from my mom saying she help take care of kids for free. My kids this fall will be in school full time ..and with how slow the underwriter is and how many extras they are throwing on that they may be in school before we get done. I am furious over the situation. We had all the financial docs to the loan officer in 2 days and responded within an hour on every loan condition …now how about finishing this process already.
    All I can say is underwriters are subjective not objective from my experience and if they are having a bad day you are screwed.

  10. Holly,

    I’m so sorry about the delays. If it were up to us every loan would be processed in a few days. Please stick with us and we will get your loan processed. I know the delay times are frustrating, but it’s just a part of the rates being so great. Please let us know if you have any other questions.


  11. My husband and I are going through this right now. I’ll be completely honest. Our credit is 680 and he makes 140k a year now doing security contracting. He served 12 years in the Marines. We got refferd eligible ?? I don’t get it. Our credit is 40 above the minimum requirements and our debt to income is great. We also just paid off 10k in debt. Our mortgage would only be 275 more than what we pay for rent currently. That is literally what he makes a day now in his line of work. Actually he makes close to 400 per day!! I don’t get this at all. It’s heart breaking to have been “pre-appeoved” have the house built to your specs then 2 days before closing find out your not approved. I’m heart sick. My husband went to war twice and now continues to deploy 9 months of the year and we can’t even get a va home loan! This is just mind boggling!! Please excuse typos. It’s 12:03 am and I’m awake just in agony over this.

  12. Much of the same for me. Several weeks of requests for the most minute detail of individual transactions within 4-mos of bank statements. I have super credit, a great paying job of $250K+ and feel as though I have been locked inn a physical for space flight. Very unsatisfied with the underwriting process and am about where Holly is and about to go elsewhere. Given the information available out there plus the documents provided, I would think there are loan apps that one could say with a level of certainty are “low-risk” without the extremes I and others that have posted have been through.

  13. Amber,

    Are you looking to purchase a home? contact us back and we will see what we can do for you. Our number is 866-569-8272

  14. We were told today our loan was turned down by the underwriter. If we can’t get approved for a loan I honestly don’t know how anyone buys a house through the va. We were told it was because my husband works for the department of state over seas. ??!!! Hello he makes 6 figures and always pays his bills! Our number is 225-270-9594. Please feel free to contact us if you think you can help. We are losing a 3k deposit and the house we designed. The asking price on the home is 279,000. House note a little over 1500. Again We make over 10k per month. None of this makes any sense to me! 🙁

  15. WOW! Reading all of this makes me almost certain that my husband and I will be denied in the underwriting!!! The house we are trying to buy is 145,000$ with the monthly mortgage supposed to be 935, our current rent is 1476!! My husband is considered 100% disabled by the VA and recieves VA Compensation and SSDI. His credit score in in the lower 600’s I think 631 is one of the 3??? He gets 900 SSDI and 3700 for the VA Comp, his debt isnt too bad however. No more then 18,000 IF that. We are going threw the underwriting now, but seeing so many people with such good credit and income get denied is pretty much disheartening!!!! :•| And we have like, no savings so there goes any “callateral” they would consider. 😛

  16. Leona,

    the hard part is the credit score. If he is in the low 600’s that is right on the border line. The minimum requirement is 620 credit score so if your credit score is at that level we should be able to help you out. if it’s just below 620 there are a bunch of places you can go to help you get that score up to where it needs to be

  17. I’m going through VA Home Loan process were all my funding fees were waived for being a disabled vetern. I’m 23 years old enrolled full time to school full time to work(30-35hrs) I have a great credit score online but aparently mortgage lenders see a different number from whats online… my score fell aroun a 660 which is above the requirements, my DTI fell above the max by 1-2 percent that is my mortgage will be 613.98(including escrow taxand insurance)+50(min for 2 cards) however I i make the appropriate amount of residual income which for my state is 441 and I average round 650 or so after all bills are paid my current apartment rent is 613 which is as you can see above the same as the mortgage I have no bad credit remarks I put 500 for the earnest monies and all they asked is for me to pay for the apraisal and the inspections which rounded about 900 all together the lender seems to think I should be fine all this has been done in less then a week i dont close until litterally one month from today 22april2013 so I just entered to underwritting process and they havent asked for a thing and its looking at about a week i should know if i got approved or not. Its a scary process but many of you guys need to do some research I only make 1500 of income a month and am purchasing a house for 110k no cosign.

  18. My fiancé and I where pre-appoved for AV loan then after the apprasil that we paid for we were denied due to us not being married. We told our banker (wells fargo) we will get married before the closing date. We got a call back they told us we are denied because he has not been at his job for 2 years. He has not been home for two years yet from deployment. He was off for 1 mo. Then got a job doing construction we live in mn and was laid off for the winter(what construction copany in mn does not get laid off for the winter) he had this job lined up while he was deployed. Now they are getting a second underwrighting done but I was told we have less the 5% to get approved 🙁 feel like we are getting penitalized for him being deployed

  19. Courtney,

    So sorry about that situation. Give us a call and we will try and help you best we can 866-569-8272

  20. So many horror stories on here. Makes me even more nervous than I was. Hopefully we have a good loan officer. He’s been double checking with underwriter throughout process to make sure we’re in line to get approved quickly. Just hope there isn’t anything that he missed. Supposed to close in 3 1/2 weeks.

  21. Jenny,

    I hope you feel comfortable with us and definitely if you ever have any concerns PLEASE contact us and we will assist you. We try and hold our loan officers to a very high standard

  22. Slight snag in the process…everything went well with underwriting process with one exception. We filed bankruptcy and it was discharged in March of 2011. They were aware of that and with a VA loan, you have to wait two years, so no issues. During the bankruptcy, we kept our house & car, along with a couple of other secured loans. However, we didn’t receive any reaffirmation papers from our mortgage company back then and they have no record of it being reaffirmed. We have continued to pay the mortgage and to live in the property. Our loan officer is trying to work something out with the underwriter, but they’re saying even if we treated it as if we foreclosed on the house, we would have to wait 3 years to purchase another property. Everywhere I’ve looked says the VA requires a two-year waiting period. However, the lender doesn’t have to follow the VA guidelines. Just heartbroken because we went through this whole process just to find out we didn’t have a piece of paper. A little frustrated because I wish we were asked for this documentation prior to paying for the appraisal, inspection and earnest deposit.

  23. Three days before closing, the buyers of my current home take possession, and now my loan officer states we may not be able to close on our new home. She staes the appraiser submitted the wrong form, needed a condo form the appraiser did a regular home form. She states she requested the appraiser make the correction six days ago, but hasn’t heard back. Any suggestions, I want to close on Friday three days from now and not have my wife and 13 month old daughter not live out of the back of a 26 foot U -Haul.

  24. What about the other side of the coin? I’m a widow who accepted an offer on my home from a vet. I made, and had accepted, an offer on another home for myself contingent on the sale of this one. It’s pretty frightening when I read that it’s not guaranteed even at this late stage (inspections and appraisals all went well) that the underwriter could still stop the sale. Wouldn’t that be great if I’m all moved out, and living in limbo! Is there no “clear to close” certificate issued, so I could possibly get prepossession of the new home?

  25. I have been promised so many things from different banks and I am sick and tired of the lies! Banks promise to be able to get your loan approved as long as you let them pull your credit score. One loan officer even told me that it wouldn’t show up on my credit report. When he finished pulling my credit report 4 times my score dropped by 40 points! He then told me that I wasn’t qualified anymore! I am working with a new mortgage company and they are alot helpful. It is still taking the underwriter several weeks to give us an answer. My wife and I are both E6s in the Army and we found a fairly cheap house to buy….$170K. Hopefully we hear something back soon!

  26. sounds like all of us vets need to contact veteran commitees and make the government aware of this travesty.

  27. Sometimes, a partial eligibility can be awarded as well.

    In addition, members of the military who were dishonorably discharged can also acquire eligibility.
    Also, since this is a VA loan, your Disability or Retirement statement from the VA will be necessary.
    * If you have credit cards, always make full and timely payments
    and keep balances at zero. There are men and women in various communities who aren’t recognized as veterans.

  28. this is so not true. My husband was on his second deployment when we tried to get a va loan to buy a house. we got pre-approved which was crap because after 2 months of BS they denied us because his deployment didn’t count as income according to them. so now we are stuck in a crappy house paying almost 3 times as much in rent. I mean really! The idiot underwriter said we couldn’t afford 298 a month house payment but yet we proved we were paying 900 a month in rent. Guess my husband is risking his life for nothing.

  29. Tori, I am sorry you had a bad experience trying to get a VA loan. I assume you did not have this experience here at Low VA Rates, and if you did please let me know. I would love for you to talk to one of our VA loan specialists and try this again. Please contact us.

  30. My husband and I got denied by the underwriter because of a break in his employment. He’s been working 20 months straight but was laid off a couple of months before that. Because he is a coal miner and the mines he was working at shut down along with several others. But before that he straight employment for years. Like I said just that small break being unemployed. Our LO is running it straight thru the bank and seems to think he can get it approved that way. I’m frustrated because we were so hoping to get out of the house that we are living in now. It’s old and falling apart. We have tax returns from all the years prior to that one year he was laid off a few months and the tax returns after that year. Each year but the one has him making over 60,000 a year. His credit score is 655 and brings home 1100 a week now. Can someone give me some hope that it may still happen? And explain to me what our options are?! Please.

  31. Thank you for your comment and we understand that these are tricky. However we would love to discuss options with you and see what we can do to help you get into a newer home with the rate that you deserve. Please feel free to call us today at
    (866) 569-8272. We will also have a Loan Officer reach out to you through email.

  32. Pingback: Va Mortgage Underwriting Process | First Home Mortgage
  33. We are going thru the process. My fiancé is a veteran and now a builder and self employed. Part of his current income is from flipping/building houses. The profit is showing as capital gains in the tax return. The underwriter came back without counting the capital gains as the income. It drops his “income”
    significantly and only approved for a very small amount of the loan. It’s impossible to purchase any home in California. I guess just to echo to previous post, my fiancé risked for his life for nothing.

  34. Angela, have you spoken to one of our loan officers about your situation? Don’t always go with the first loan company who solicits you. Give us a call before it is too late. If we can, we would love to help you!

  35. Wow I reading all these horrible experiences sound familiar. Maybe because due to health problems I filed bankruptcy almost 20yrs ago(I heard most file twice) and I was so scared to buy another house that horrible neighbors made me decide I need to “buy” peace and quiet!My financial advisor has been begging me to buy since as a 100% disabled vet I’m exempt from property taxes etc. I found a realtor and 3 lenders. All my scores came back over 800 no debt but I’m still treating this process as if something can go wrong. Found the perfect quiet place. Inspection and lender meetings next week!! Good luck everyone…..

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