Why VA Loans Get Denied In Underwriting and What You Can Do (2024)

At a Glance

There are many reasons VA loans may get denied in the underwriting process. Here we look at the most common and what you can do to mitigate issues as you near closing.

If you're here, the odds are you're hoping to prevent any hiccups in the homebuying process, or your VA loan may have just gotten denied.

For anyone recently denied, I'm incredibly sorry if this happened. No Veteran wants to hear they're unable to move forward with the homebuying process. When searching for answers, you should know the reason for loan denials can vary considerably, depending on the applicant and their specific financial situation, the property, the appraisal process and much more.

Whether you were denied with Veterans United or another lender, the first thing to do when you find out your VA loan was denied after preapproval is to call your loan officer. They should be able to give a specific reason why you were denied—and advice on how to improve your ability to buy a home in the future.

We cover some typical scenarios below, but it's generally best to talk to your loan officer if you have specific questions.

Common Reasons for VA Loan Denial in Underwriting

VA loan denial isn't uncommon, but your odds are generally better with a VA loan. According to HMDA data, 12.93% of VA loan applications received a denial in 2022, compared to 17.29% of FHA loans and 17.9% of conventional loans.

While not uncommon, many scenarios may be preventable. Here are the most common reasons VA loans get denied and how you can prevent heartbreak during the homebuying process.

Changes in Credit

Before closing, your underwriter will re-verify your credit to ensure consistency and that you didn't take on any new debts that could impact your ability to afford your mortgage. New debts include auto loans, ATV loans, credit cards and more. Your underwriter will also ensure you didn't default on existing debt during the homebuying process.

Keep in mind that even the little things can throw up red flags. Avoid credit checks whenever possible and resist the urge to take out any new debt until your loan has closed. Keep a lid on your spending as the process unfolds. Remember that new debts could affect your debt-to-income ratio and, ultimately, your ability to qualify for your VA home loan.

Was your VA loan denied because of credit? Our team is here to help. Talk with a credit consultant today.

Application Errors

Despite the reams of documents and sophisticated computer programs, home lending is ultimately a business comprised of human beings. That means there's always a chance for something to go wrong.

Sometimes loans can be denied because of application errors. Double check your loan paperwork and make sure everything is correct when you're filling out paperwork, writing letters of explanation or providing supporting documents. Most mistakes are easily fixable if caught early on, but you don't want something slipping through the cracks until the last minute.

Underwriters are sticklers for accuracy. Unverifiable income, undisclosed debt and even minor errors like the number of family members can cause problems. Sometimes these problems create a delay. Other times it's a deal-breaker. The best thing you can do is ensure your information is accurate and bring anything that looks off to your loan officer's attention.

Simple mistakes, oversights and paperwork flubs do occur. Most of the problems that could affect your loan are easily fixed, if not easily preventable.

» MORE: See if you meet VA credit guidelines

Unverifiable or Lack of Stable Income

A common hurdle for many self-employed VA loan borrowers stems from inconsistency in their income. Remember, the underwriter is here to verify you can repay the loan. If your tax returns show an insufficient amount or heavily fluctuating income, it can trigger additional scrutiny or a denial.

Additionally, your lender may require copies of your profit and loss statements, balance sheets and other business financials. If you cannot furnish these, it can cause problems and prevent you from getting to the closing table.

These situations aren't always preventable, but you can help by being transparent with your loan team and providing all documentation when requested.

Change in Employment

Keep your employment consistent throughout the loan process. If a change is necessary, talk to your loan officer. An underwriter may consider income from a new job to be unreliable, so it's important to plan ahead.

Even a good career move may trigger a new set of documentation and verifications.

Borrower Delays

An underwriter might ask for additional financial statements and other information. Make sure you understand the requests and talk with your loan officer if you're unsure. Your loan officer may be able to find alternate ways to satisfy the requirement. Underwriters will not issue final loan approval until they have reviewed every piece of required documentation, so a prompt response is key.

Delays in providing requested documentation may not trigger a denial, but they can prevent the loan from closing on time.

Factors Beyond your Control

While not a "denial," other factors could cause a deal to fall through. For example, the seller could back out, or the VA appraisal could come in far below market value, and the seller may be unwilling to come down in price. At Veterans United, we've seen just about everything that can happen and will be there to get you through it.

» MORE: See if you meet VA credit guidelines

What to Do if Your Loan is Denied

If your loan gets denied, the first thing you should do is get a clear understanding as to why. Borrowers don't typically communicate with underwriters, but your loan officer should provide an exact reason for the denial.

If credit is the issue, Veterans United provides a credit consulting team to help Veterans become homeowners. Talk with a credit consultant today to understand your options.

Regardless of the denial, keep in mind that denials typically aren't permanent. Credit scores change, income levels change, and a Veteran not able to purchase immediately may find their way to homeownership as soon as months after the original denial.

If you're concerned about what the VA loan process may look like for you, speak with a Veterans United VA Loan Expert about your specific situation anytime at 855-870-8845.

» MORE: See if you meet VA credit guidelines

ByChris Birk, Vice President of Mortgage Insight

Chris Birk is the author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.”An award-winning former journalist, Chris writes about mortgages and homebuying for a host of sites and publications. His analysis and articles have appeared at The New York Times, the Wall Street Journal, USA Today, ABC News, CBS News, Military.com and more.More than 300,000 people follow VA Loans Insider, his interactive VA loan community on Facebook.

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