For qualified veterans and current military service members, VA home loans backed by the Department of Veterans offer amazing terms and low rates. And although they have slightly different regulations and requirements, it's actually not harder to qualify for a VA loan than for a traditional mortgage. In fact, recent surveys show that VA loan applications are more likely to close than a conventional loan. However, there can be hiccups with any application, no matter the type. Here are some of the most common reasons your VA loan might be denied and how you can avoid them.
- Application Errors
All submitted information is checked and rechecked by the mortgage underwriters during the loan process. If you made any mistakes on your paperwork, your VA loan might be delayed or even denied. It pays to take a little extra time to review your application before turning it in to your lender. Does everything look correct? Can you verify all your income? Have you disclosed all of your debts? Getting all the data right the first time will save you a lot of hassle and headache.
- Credit Score Changes
While VA loans are very generous with credit score qualifications, loan underwriters do not like to see credit scores drop during the loan process. This is a red flag to a lender, saying you may be more of a financial risk than they originally thought. Your credit score might take a hit if you make any large purchases while waiting for your loan to close. So, avoid the temptation to start buying new furniture and appliances for your new home until after the sale is complete. And it’s best to wait on any new credit applications, like new car loans or credit cards as well. These credit checks can bring down your credit and making large purchases will affect your debt-to-income ratio.
- Employment Changes
Your VA loan might be denied if you change jobs during the underwriting process. Even if you are moving to a better-paying job, lenders like to see a stable work history. Quitting your current job for something else restarts your employment history as far as the loan is concerned. You will be considered a bigger lending risk because your new work situation is an unknown and your mortgage might fall through. Avoid changing jobs until your loan closes at all costs.
- Property Problems
VA loans have certain minimum property requirements for approval. The home must be in good repair, or “safe, structurally sound, and sanitary,” It needs to have a solid roof, windows, and siding, as well as properly functioning electrical and plumbing systems. If your home inspection turns up any major issues in these areas, your VA might get denied. If you want to buy a fixer-upper, there are VA loans for renovations, but you would need to apply for one of these separately from a standard VA purchase loan.
While VA loans are pretty straightforward, you can help your chances of being approved by avoiding the most common mistakes and slipups.
These materials are not from HUD, VA, or FHA and were not approved by HUD or any other government agency.