The difference between VA loan approval and rejection may come down to a few compensating factors.
When it comes to qualifying for a VA loan, there’s a fine line between rejection and approval. Veterans bordering the two may have compensating factors that can nudge them up to approval status.
It’s important to note that there may be two sets of qualifying guidelines when it comes to VA loans. The VA has its own minimum guidelines before it will guarantee a lender a percentage up to 25% of the conforming loan limit on a veteran’s loan. Then, most VA-approved lenders may have additional qualifying standards to originate and fund the mortgage. However, certain compensating factors can enable some borrowers to get approved, even if they are on the cusp of rejection.
VA underwriters reviewing marginal applications may find themselves having to take a closer look at the borrower’s circumstances in order to put their stamp of approval on a loan. Here are some of the possible compensating factors that could help a marginal applicant’s cause:
- Excellent long-term credit history
- Conservative use of consumer credit
- Minimal consumer debt
- Long-term employment
- Significant liquid assets
- Down payment
- Equity in the home
- Little or no increase in living expenses after the loan
- Military financial compensation
- Satisfactory homeownership
- Higher residual income
- Low debt-to-income ratio
- Tax credits for child-care
Though one or more of these factors can compensate for certain deficiencies that make for a weak area in the borrower’s application, they will not make up for unsatisfactory credit or insufficient income. Having one or more of the above factors in your favor does not necessarily mean you will qualify despite deficiencies.
For more information about VA loan qualifying, contact a direct VA lender.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender