What VA Loan Underwriters Seek: 10 Key Factors

When applying for a VA loan, there are certain key factors that underwriters look for in order to determine if the applicant is eligible for the loan. These factors includecredit score, debt-to-income ratio,employment history,income stability, and more. In this article, we will explore these factors in more detail, providing you with the information you need to increase your chances of being approved for a VA loan.

Credit Score

Your credit score is one of the most important factors that underwriters will consider when evaluating your application for a VA loan. While the minimum credit score required for a VA loan is typically lower than that of a conventional loan, you will still need a credit score of at least 620 to qualify. A higher credit score will increase your chances of being approved and may even lead to lower interest rates.

Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is another important factor that underwriters will consider. This ratio compares your monthly debt payments to your monthly income. Ideally, your DTI should be no more than 41%, although some lenders may accept ratios as high as 50%. If your DTI is too high, you may not be approved for a VA loan.

Employment History

Underwriters will also look at your employment history to determine if you have a stable source of income. Generally, you will need to have been employed for at least two years in order to be eligible for a VA loan. If you have recently changed jobs or have gaps in your employment history, you may still be able to qualify, but it will depend on your overall financial situation.

Income Stability

In addition to your employment history, underwriters will also look at your income stability. This means that they will want to see that you have a consistent source of income and that your income has been stable over the past several months. If you have recently experienced a significant drop in income or have irregular income, it may be more difficult to qualify for a VA loan.

Loan-to-Value Ratio

The loan-to-value (LTV) ratio is another important factor that underwriters will consider. This ratio compares the amount of the loan to the appraised value of the property. Generally, the maximum LTV for a VA loan is 100%, meaning that you can finance the entire amount of the purchase price. However, if the LTV is higher than 80%, you may be required to pay for private mortgage insurance (PMI).

Residual Income

Underwriters will also look at your residual income to determine if you have enough money left over each month to cover your living expenses after paying your mortgage. The amount of residual income required will depend on your family size, location, and other factors. Generally, you will need to have at least $400 in residual income each month to be eligible for a VA loan.

Property Condition

The condition of the property you are purchasing will also be evaluated by underwriters. The property must meet certain standards in order to be eligible for a VA loan. For example, it must be a single-family home, condominium, or townhouse that is in good condition and free from any hazards.

Loan Purpose

Finally, underwriters will consider the purpose of the loan. VA loans can be used for a variety of purposes, including the purchase of a home, the refinance of an existing loan, and the construction of a new home. The purpose of the loan will impact the underwriting process and the documentation required.

Conclusion

In conclusion, if you are considering applying for a VA loan, it is important to understand the key factors that underwriters will consider when evaluating your application. By focusing on improving your credit score, reducing your debt-to-income ratio, maintaining a stable source of income, and meeting the other eligibility requirements, you can increase your chances of being approved for a VA loan. Additionally, working with an experienced VA loan specialist can help you navigate the underwriting process and find the best loan terms for your specific situation.