When you apply for home financing with a VA loan, you increase your chances of getting into a large home. While most qualified veterans may qualify for funding, some will be denied their loan application. The most common reason applications for VA home loans are denied is due to errors in the application itself. Lenders cannot issue loans unless they are sure that their personal and financial information is correct.
Before submitting your request, take the time to review each statement you make and the numbers you enter. If everything seems right, go ahead and send it. If you identify errors, correct them immediately. This way, the lender can review your application and make a decision without waiting for you to change it.
All loans are conditional until closing, which means that any loan can be denied at any time, until the funds are issued. When lenders refuse a loan, they reluctantly do so. VA lenders make money by approving loans, not denying them, so they can do what they can to get you approved. When they can't, they'll send what's called an adverse action notice.
Auto-underwriting is a system used by many lenders. They have an online portal where they upload reserves, assets, revenues, and loan applications, as well as other qualification criteria. The system determines if an applicant qualifies or not. Application errors are the leading cause of VA loan denial.
That's why, before submitting your documents, you should double check them for accuracy. Insurers are perfectionists when it comes to accuracy and it is wise to eliminate all errors. Inexperienced lenders can also make mistakes that, even if not intentional, can result in denied VA loan applications. If you are considering buying a home or have applied for a VA home loan and you were denied, read on.
If the home inspection discovers problems that make the home “uninhabitable” according to VA standards, the loan will be denied. If an automated underwriting system denies you a VA loan and you think one of these issues was at hand, don't give up. When considering your financial history, it's important to note that past bankruptcies or foreclosures don't automatically mean that your VA loan application is denied.